Exam 9: The Private Equity Market

Research by Braun, Jenkinson, and Stoff showed that private equity returns are not only persistent but that persistence remained steady as the industry has grown.

In recent years private equity firms have increasingly been able to negotiate "covenant lite" loans.

Kaplan and Schoar found which of the following with respect to private equity firms?

Carried interest refers to the gains on transactions by private equity firms.

Phalippou and Gottschalg analyzed the same return data as Kaplan and Schoar but found that private equity returns trailed the S&P 500 when unexited deals were taken into account.

Answer: Glode and Green theorize that the findings of Kaplan and Schoar may be due to insufficient disclosure by private equity firms.

Which of the following is a way that private equity firms can extract money from the targets they take over:

Examples of the types of institutions that become limited partners in private equity funds include:

Drexel Burnham and Lambert and Michael Milken were pioneers in the development of the hedge fund industry.

Harris, Jenkinson, and Kaplan's research showed that private equity returns outperformed the market by over 3% annually.

Research by Eric Stafford has showed that individual investors can't really replicate the returns of private equity managers.

Private equity firms used to be referred to as LBO firms.

Private equity firms have typically been compensated according to the following "formula":

Officer et al. found that target companies received higher takeover premiums in club deals.