Prolonged Private Equity Holding Periods: Six Years Is the New Normal

Juha Joenväärä; Juho Mäkiaho; Sami Torstila

doi:10.3905/jai.2022.1.165

Prolonged Private Equity Holding Periods: Six Years Is the New Normal

Juha Joenväärä, Juho Mäkiaho, Sami Torstila

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Korona Invest

Tutkimustuotos: Lehtiartikkeli › Article › Scientific › vertaisarvioitu

3 Sitaatiot (Scopus)

Abstrakti

The high internal rates of return sought by private equity funds are highly sensitive to portfolio company holding periods. The authors examine the determinants of holding periods for a sample of European buyouts from 2000 to 2015. Their results establish that the average holding period has lengthened to 5.8 years in the period after the Global Financial Crisis. What explains this fact? The European sample allows the authors to control for both portfolio-company-level and fund-level differences. They first rule out that the increase is fully driven by changes in exit markets. Increased competition in European private equity markets remains a plausible complementary mechanism.

Alkuperäiskieli	Englanti
Sivut	65-93
Sivumäärä	29
Julkaisu	Journal of Alternative Investments
Vuosikerta	25
Numero	1
Varhainen verkossa julkaisun päivämäärä	2 toukok. 2022
DOI - pysyväislinkit	https://doi.org/10.3905/jai.2022.1.165
Tila	Julkaistu - kesäk. 2022
OKM-julkaisutyyppi	A1 Alkuperäisartikkeli tieteellisessä aikakauslehdessä

Rahoitus

We thank Terry Odean and seminar participants at Aalto University for comments and Joonas Lappalainen for excellent research assistance. Mr. Torstila thanks Haas School of Business, UC Berkeley, where part of this work was completed. We also thank the Academy of Finland for funding.

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10.3905/jai.2022.1.165

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abstract = "The high internal rates of return sought by private equity funds are highly sensitive to portfolio company holding periods. The authors examine the determinants of holding periods for a sample of European buyouts from 2000 to 2015. Their results establish that the average holding period has lengthened to 5.8 years in the period after the Global Financial Crisis. What explains this fact? The European sample allows the authors to control for both portfolio-company-level and fund-level differences. They first rule out that the increase is fully driven by changes in exit markets. Increased competition in European private equity markets remains a plausible complementary mechanism.",

author = "Juha Joenv{\"a}{\"a}r{\"a} and Juho M{\"a}kiaho and Sami Torstila",

note = "Funding Information: We thank Terry Odean and seminar participants at Aalto University for comments and Joonas Lappalainen for excellent research assistance. Mr. Torstila thanks Haas School of Business, UC Berkeley, where part of this work was completed. We also thank the Academy of Finland for funding. Publisher Copyright: {\textcopyright} Solar-Terrestrial Physics.All right reserved.",

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doi = "10.3905/jai.2022.1.165",

language = "English",

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T1 - Prolonged Private Equity Holding Periods

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AU - Joenväärä, Juha

AU - Mäkiaho, Juho

AU - Torstila, Sami

N1 - Funding Information: We thank Terry Odean and seminar participants at Aalto University for comments and Joonas Lappalainen for excellent research assistance. Mr. Torstila thanks Haas School of Business, UC Berkeley, where part of this work was completed. We also thank the Academy of Finland for funding. Publisher Copyright: © Solar-Terrestrial Physics.All right reserved.

PY - 2022/6

Y1 - 2022/6

N2 - The high internal rates of return sought by private equity funds are highly sensitive to portfolio company holding periods. The authors examine the determinants of holding periods for a sample of European buyouts from 2000 to 2015. Their results establish that the average holding period has lengthened to 5.8 years in the period after the Global Financial Crisis. What explains this fact? The European sample allows the authors to control for both portfolio-company-level and fund-level differences. They first rule out that the increase is fully driven by changes in exit markets. Increased competition in European private equity markets remains a plausible complementary mechanism.

AB - The high internal rates of return sought by private equity funds are highly sensitive to portfolio company holding periods. The authors examine the determinants of holding periods for a sample of European buyouts from 2000 to 2015. Their results establish that the average holding period has lengthened to 5.8 years in the period after the Global Financial Crisis. What explains this fact? The European sample allows the authors to control for both portfolio-company-level and fund-level differences. They first rule out that the increase is fully driven by changes in exit markets. Increased competition in European private equity markets remains a plausible complementary mechanism.

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ER -

Prolonged Private Equity Holding Periods: Six Years Is the New Normal

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