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- Title
Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting.
- Authors
Stafford, Erik
- Abstract
The contributions of asset selection and incremental leverage to buyout investment performance are more important than typically assumed or estimated to be. Buyout funds select small firms with distinct value characteristics. Public equities with these characteristics have high risk-adjusted returns relative to common factors. Adding incremental leverage to a publicly traded stock portfolio increases both risks and mean returns in this sample. Direct investments in private equity funds earn lower mean returns than a replicating strategy designed to mimic these key economic features of their investment process with public equities and brokerage loans.
- Subjects
PRIVATE equity; VALUE investing (Finance); FINANCIAL leverage; MATURITY (Finance); BUYOUTS
- Publication
Review of Financial Studies, 2022, Vol 35, Issue 1, p299
- ISSN
0893-9454
- Publication type
Article
- DOI
10.1093/rfs/hhab020