According to a new study in The Journal of Finance, private equity has average returns roughly equal to the S&P 500 (net of management fees). This contradicts the myth that private equity outperforms the public market benchmarks by 4%-6% annually. However, there is large variation in performance across private equity partnerships. We also find that there is a significant amount of persistence in private equity, not only among successful funds but also for the unsuccessful ones. Successful private equity groups tend to continue to be successful, while poorly performing investments tend to continue to perform poorly.
This persistence result is very different from the results for other asset classes like mutual funds and hedge funds where persistence, if it exists at all, is modest or minimal. Moreover, the study demonstrates a cyclical pattern to investment flows into private equity. Investment flows into the industry tend to increase after periods of good private equity performance and decreases after poor performance. Subsequent returns to private equity are lower after periods of large investment inflows and vice versa for out flows. Interestingly the study finds that returns of established funds with good track records are much less affected by the industry cycles than the returns of young funds (especially those that enter in boom times).
This study has important implications for investors. Because there is such a large range of performance among various firms, investors need to be selective to find funds that have proven consistently successful. The wise investor will not simply assume that these investments will do significantly better than investments in public markets.
RWI/ISL-Container Throughput Index ending 2017 on a positive note
24.01.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung
Uncovering decades of questionable investments
18.01.2018 | University of Texas at Austin, Texas Advanced Computing Center
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For photographers and scientists, lenses are lifesavers. They reflect and refract light, making possible the imaging systems that drive discovery through the microscope and preserve history through cameras.
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Scientists from the University of Zurich have succeeded for the first time in tracking individual stem cells and their neuronal progeny over months within the intact adult brain. This study sheds light on how new neurons are produced throughout life.
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Let’s say the armrest is broken in your vintage car. As things stand, you would need a lot of luck and persistence to find the right spare part. But in the world of Industrie 4.0 and production with batch sizes of one, you can simply scan the armrest and print it out. This is made possible by the first ever 3D scanner capable of working autonomously and in real time. The autonomous scanning system will be on display at the Hannover Messe Preview on February 6 and at the Hannover Messe proper from April 23 to 27, 2018 (Hall 6, Booth A30).
Part of the charm of vintage cars is that they stopped making them long ago, so it is special when you do see one out on the roads. If something breaks or...
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