Performance of Private Equity Funds - Literature review Example

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The paper "Performance of Private Equity Funds" highlights that private funds are outperformers as compared to any other investment in their category, but only on a very long term basis, as a matter of fact, on a short term basis (particularly after the year 2000) they have been underperformers. …
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Performance of Private Equity Funds
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Download file to see previous pages Along with the spectacular growth of the capital of such companies as Microsoft, Apple, FedEx, the private equity investment firms and their investors have also been successful in multiplying their investments in times fold. Most of the time these private equity funds have major shareholding, and business control authority as their prime purpose or foundations, and are mostly only long term or medium term financers. They appoint several accountants and auditing experts to check out the company’s performance and make their financing decisions based on the previous performances of the company. Although, these financers also perform fundamental and technical analysis on the company’s reports to check the future prospects of the business. The fundamental analysis is used to determine whether the fundamentals or the basic foundations & principles of the company might stand out in the long run, and the technical analysis is conducted through various predetermined analysis techniques (quite similar to the technical analysis conducted for the Forex & Stock Markets) based on the company’s past performance to judge its future performance and growth prospects.
Jan Miczaika (Research Assistant – Chair of Entrepreneurship), also like many of our other authors, compares the performance of Private equity funds with the S&P 500 index, and concludes that including the heavy fee laid by these funds, average returns (calculated during a specific 17 year period) are quite equal to that of the S&P 500 accumulated. (Miczaika)
He also states that the performance of these funds is lower than S&P 500 is calculated via the equal-weighted basis and higher is calculated based on the capital weighted basis(Miczaika), so the choice for these Private funds to show off their results is pretty obvious.
The authors state the importance of Private equity funds in the present economic conditions by using statements grabbed from The Economist such as “Capitalism’s new kings”. To prove the stability in these funds, the authors have also accumulated some very interesting data which states that the investment base of these firms has amplified from just $ 5 Billion in the year 1980 to $ 300 Billion in 2004. (Phalippou and Zollo, The Performance of Private Equity funds) ...Download file to see next pagesRead More
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