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Title:Net asset value discounts in listed private equity funds PDF Logo
Authors:Lahr, Henry
Kaserer, Christoph
Issue Date:2009
Series/Report no.:CEFS working paper series 2009-12
Abstract:This paper investigates determinants and consequences of net asset value discounts in listed private equity funds. Listed private equity funds share characteristics of closed-end mutual funds and traditional unlisted private equity funds and can therefore offer insights into both. Our results have particular relevance to the pricing of unlisted private equity funds where no market prices are observable. We find that funds start at an initial premium of -2.5 % and adapt to the long-term average of -21 % after two years. Fund returns display a U-shaped seasonality, which is related to publishing dates of annual reports. Stock performance is exceptionally weak in buyout funds after their initial public offering. Premia predict future stock returns and are explained by liquidity and by investor sentiment, but not by the fund's investment degree. A decrease in premia over the first few quarters after the fund's IPO remains unexplained, which partially supports the management ability hypothesis. Private equity fund premia depend on credit markets and systematic risk. This relation suggests that some information about the fund's portfolio is not reflected in net asset values, which seem to proxy for future fund cash flows.
Subjects:Listed Private Equity
Private Equity
Venture Capital
Net Asset Value
Book-to-Market Ratio
Closed-end Fund Discount
JEL:G12
G14
G24
Document Type:Working Paper
Appears in Collections:CEFS Working Paper Series, Center for Entrepreneurial and Financial Studies, Technische Universität München

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