Characteristics of private equity return: evidence from Brazil
-
DOIhttp://dx.doi.org/10.21511/imfi.18(1).2021.01
-
Article InfoVolume 18 2021, Issue #1, pp. 1-11
- 1137 Views
-
405 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
Private equity (PE) stands out significantly in the world as one of the main development tools of the capital market in emerging economies and alternative sources of finance for companies. Particularly, the increase in fund value and continuous returns are objects of intense study in Brazil. The paper aims to find determinants to Brazilian private equity returns, regarding three relevant variables funds characteristics and GDP to a macroeconomic view. A sample of 1,112 PE funds registered at the Brazilian Securities and Exchange Commission (CVM) was used and analyzed by three main variables: period of establishment, equity size, and exclusivity as possible determinants of funds’ performance using multiple regression model and fourth variable GDP is applied as a descriptive variable. The results indicate that older funds had a return premium of 1.5% monthly over young funds, smaller funds had a return premium of 1.4% over larger funds, and exclusivity does not influence the funds’ performance. Thus, the paper provides a basis for the relevant factors that an investor should verify in Brazil’s private equity fund before allocating the resources.
- Keywords
-
JEL Classification (Paper profile tab)G24, G32, G34
-
References32
-
Tables7
-
Figures2
-
- Figure 1. Comparison of the average return of FIPs and Brazilian GDP between 2004 and 2016
- Figure 2. Exclusive funds distribution by interest period
-
- Table 1. Hypotheses chart and references
- Table 2. Groups for analysis
- Table 3. Results of multiple linear regressions
- Table 4. Performance of FIPs selected by their size in equity
- Table 5. Performance of FIP according to their period of establishment
- Table 6. Performance of exclusive and non-exclusive FIP funds
- Table 7. Summary of the results chart
-
- ABVCAP – Associação Brasileira de Private Equity & Venture Capital. (2012). Sobre o setor: capital empreendedor.
- Appelbaum, E., & Batt, R. (2016). Are Lower Private Equity Returns the New Normal? (No. 2016-10). Center for Economic and Policy Research (CEPR).
- Bardella, R. P. (2009). Relação entre desempenho e captação de fundos multimercado no Brasil (Doctoral dissertation).
- Bessa, L. M., & Funchal, B. (2012). Determinantes da Performance dos Fundos de Investimento em Ações no Brasil.
- Braun, R., Jenkinson, T., & Stoff, I. (2017). How persistent is private equity performance? Evidence from deal-level data. Journal of Financial Economics, 123(2), 273-291.
- Carsalade, F., & Rennó, R. (2014). Brazilian Private Equity: A new direction. INSEAD Global Private Equity (GPEI).
- Carvalho, A. G. D., Ribeiro, L. D. L., & Furtado, C. V. (2006). A indústria de private equity e venture capital: 1° censo brasileiro.
- Caselli, S. (2009). Private equity and venture capital in Europe: markets, techniques, and deals. Academic Press.
- Chemmanur, T. J., & Loutskina, E. (2009). How do corporate venture capitalists create value for entrepreneurial firms?
- Dâmaso, L. C. D. S. (2017). Private equity: impacto no retorno das ações de empresas do setor elétrico no Brasil (Master’s thesis).
- De Carvalho, M. R. A. (2005). Avaliação de desempenho de fundos multimercado: resultados passados podem ser utilizados para definir uma estratégia de investimento? Revista de Economia e Administração, 4(3).
- Dias, R. D. S. (2014). Estudo sobre a captação dos fundos de Private Equity e Venture Capital (Master’s thesis).
- EMPEA – Emerging Markets Private Equity Association. (2011). Global Limited Partners Survey: Investors’ Views of Private Equity in Emerging Markets.
- EMPEA – Emerging Markets Private Equity Association. (2016). Global Limited Partners Survey: Investors’ Views of Private Equity in Emerging Markets.
- Fang, L., Ivashina, V., & Lerner, J. (2015). The disintermediation of financial markets: Direct investing in private equity. Journal of Financial Economics, 116(1), 160-178.
- Gompers, P., Kaplan, S. N., & Mukharlyamov, V. (2016). What do private equity firms say they do? Journal of Financial Economics, 121(3), 449-476.
- Gorman, M., & Sahlman, W. A. (1989). What do venture capitalists do? Journal of Business Venturing, 4(4), 231-248.
- Grinblatt, M., & Titman, S. (1994). A study of monthly mutual fund returns and performance evaluation techniques. Journal of Financial and Quantitative Analysis, 29(3), 419-444.
- Harris, R. S., Jenkinson, T., & Kaplan, S. N. (2014). Private equity performance: What do we know? The Journal of Finance, 69(5), 1851-1882.
- Hoffmann, R. (2016). Análise de regressão: uma introdução à econometria.
- Iquiapaza, R. A., Vidal Barbosa, F., Fernandes Amaral, H., & Bressan, A. A. (2008). Condicionantes do crescimento dos fundos mútuos de renda fixa no Brasil. Revista de Administração-RAUSP, 43(3).
- Jegadeesh, N., Kräussl, R., & Pollet, J. (2009). Risk and expected returns of private equity investments: evidence based on market prices (No. w15335). National Bureau of Economic Research.
- Jones, M. (2007). Examination of fund age and size and its impact on hedge fund performance. Derivatives Use, Trading & Regulation, 12(4), 342-350.
- Kaplan, S. N., & Schoar, A. (2005). Private equity performance: Returns, persistence, and capital flows. The Journal of Finance, 60(4), 1791-1823.
- Leeds, R., & Sunderland, J. (2003). Private equity investing in emerging markets. Journal of Applied Corporate Finance, 15(4), 111-119.
- Ljungqvist, A., & Richardson, M. (2003). The cash flow, return and risk characteristics of private equity (No. w9454). National Bureau of Economic Research.
- Meirelles, J. L. F., Pimenta Júnior, T., & Rebelatto, D. A. D. N. (2008). Venture capital e private equity no Brasil: alternativa de financiamento para empresas de base tecnológica. Gestão e Produção, 15(1), 11-21.
- Minardi, A. M. A. F., Kanitz, R. V., & Bassani, R. H. (2014). Brazilian Private Equity and Venture Capital Funds Performance from 1990 until 2013.
- Ramalho, C., Furtado, C. V., & Lara, R. (2011). A indústria de private equity e venture capital: 2º censo brasileiro.
- Romain, A., & van Pottelsberghe, B. (2004). The Determinants of Venture Capital: Additional Evidence (No. 2004, 19) (Discussion paper Series 1/Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank).
- Wright, M., Pruthi, S., Amess, K., & Alperovych, Y. (2019). Private equity: where we have been and the road ahead. Venture Capital, 21(1), 51-64.
- Yan, X. S. (2008). Liquidity, investment style, and the relation between fund size and fund performance. Journal of Financial and Quantitative Analysis, 43(3), 741-767.