PT  - JOURNAL ARTICLE
AU  - Stephannie Larocque
AU  - Sophie Shive
AU  - Jennifer Sustersic Stevens
TI  - Private Equity Performance and the Effects of Cash-Flow Timing
AID  - 10.3905/jpm.2022.1.395
DP  - 2022 Jul 12
TA  - The Journal of Portfolio Management
PG  - jpm.2022.1.395
4099  - https://pm-research.com/content/early/2022/07/12/jpm.2022.1.395.short
4100  - https://pm-research.com/content/early/2022/07/12/jpm.2022.1.395.full
AB  - Private equity (PE) firms have discretion over the timing of their funds’ capital calls and distributions, making the popular internal rate of return (IRR) an incomplete measure of PE fund performance. Do investors avoid the textbook pitfalls of the IRR when cash-flow timing is partly endogenous? In a comprehensive sample of 6,945 funds, the authors find that more than half of the funds’ IRR is attributable to timing, with substantial variation. The timing component persists across a PE firm’s funds and facilitates fundraising.