Wednesday webinar at one: Statistical biases in private equity returns
Wednesday 27 September 2023 | 13:00 - 13:40 | Webinar
Private Equity (PE) has grown into a substantial asset class, but there remain major problems with measuring PE fund returns.
Investors continue to use the internal rate of return (IRR) as a key measure of fund performance. It is well known that early returns of cash can have a substantial impact on fund IRRs, but the magnitude and causes of this effect have not previously been systematically analysed.
In this session Simon Hayley will demonstrate how the IRR is affected by two biases: a convexity bias, and a “quit-whilst-ahead” bias arising because the returns on PE projects are correlated with their durations.
Learning outcomes
- Understand how PE fund IRRs differ systematically from the returns quoted on liquid investments, and how this difference can be quantified.
- Understand the impact that this might have on portfolio allocation decisions.
- Explore unbiased alternative performance measures.
Timings
Registration: 12:55
Event: 13:00 - 13:40
CPD Points: 0.75
Speakers
Simon Hayley, Senior Lecturer of Fiance, Bayes Business School
Simon Hayley joined Bayes Business School (formerly Cass) following a career as an economic adviser at HM Treasury and the Reserve Bank of New Zealand, and as a market analyst for a range of city institutions.
His research at Bayes has been published in leading global journals. A key theme in this research is investor behaviour and the misconceptions that sometimes drive it. Based on his teaching, he wrote "Economics: A Primer" (OUP, 2018) with Alec Chrystal.
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