TY - JOUR
T1 - Performance of Private Equity Funds in Korea
AU - Bae, Kibeum
AU - Yi, Junesuh
N1 - Publisher Copyright:
© 2020, Korean Securities Association. All rights reserved.
PY - 2020
Y1 - 2020
N2 - This study analyzes performance of PEFs in Korea. Using the unique return data of 134 private equity funds collected from limited partners (LP) including pension funds, this study explores performance differences by investment step, strategy, timing, and fund size. This study also investigates risk adjusted return, return on economic cycles, and likelihood of performance exaggeration by general partners (GP) on liquidated funds. In addition, this paper examines factors to affect PEF performance. We find that Korean PEF records 6.12% of IRR and 1.22 of investment multiple on average. Fund performance is also found to be superior in liquidated funds by investment step, buyout funds by investment strategy, and small funds by fund size. As the result of analyzing performance of only liquidated funds, reflecting the nature of private equity funds where most of the profits are realized at the time of harvesting, we find that risk adjusted returns by measuring KS-PME, PME+, and direct alpha overperform market returns, and that funds liquidated during the recession display higher returns than funds liquidated during the boom. In terms of factors affecting performance, fund performance is negatively related to fund life, market return, and GDP growth rate.
AB - This study analyzes performance of PEFs in Korea. Using the unique return data of 134 private equity funds collected from limited partners (LP) including pension funds, this study explores performance differences by investment step, strategy, timing, and fund size. This study also investigates risk adjusted return, return on economic cycles, and likelihood of performance exaggeration by general partners (GP) on liquidated funds. In addition, this paper examines factors to affect PEF performance. We find that Korean PEF records 6.12% of IRR and 1.22 of investment multiple on average. Fund performance is also found to be superior in liquidated funds by investment step, buyout funds by investment strategy, and small funds by fund size. As the result of analyzing performance of only liquidated funds, reflecting the nature of private equity funds where most of the profits are realized at the time of harvesting, we find that risk adjusted returns by measuring KS-PME, PME+, and direct alpha overperform market returns, and that funds liquidated during the recession display higher returns than funds liquidated during the boom. In terms of factors affecting performance, fund performance is negatively related to fund life, market return, and GDP growth rate.
KW - Buyout Funds
KW - Direct Alpha
KW - IRR(Multiple)
KW - PME
KW - Private Equity
UR - http://www.scopus.com/inward/record.url?scp=85144893671&partnerID=8YFLogxK
U2 - 10.26845/KJFS.2020.04.49.2.163
DO - 10.26845/KJFS.2020.04.49.2.163
M3 - Article
AN - SCOPUS:85144893671
SN - 2005-8187
VL - 49
SP - 163
EP - 187
JO - Korean Journal of Financial Studies
JF - Korean Journal of Financial Studies
IS - 2
ER -