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The growth of the private equity industry has spurred concerns about its impact on the economy. This analysis looks across nations and industries to assess the impact of private equity on industry performance. We find that industries where private equity funds invest grow more quickly in terms of total production and employment and appear less exposed to aggregate shocks. Our robustness tests provide some evidence that is consistent with our effects being driven by our preferred channel. This paper was accepted by Amit Seru, finance .

Effective risk management is essential for private equity (PE) funds to navigate economic, market, and operational challenges while maximizing investor returns. This study aims to evaluate the risk management practices employed by private equity funds in South Africa, focusing on the tools used for pre-investment risk assessment and the strategies implemented throughout the investment process. A quantitative approach was adopted, using a semi-structured questionnaire administered to 31 private equity fund managers in South Africa’s Gauteng province. The Mann-Whitney U test, a non- parametric statistical method, was applied to assess the independence of smaller and larger fund groups, given their distinct nature and the non-normal distribution of the dependent variable. The findings indicate that traditional pre-screening risk assessment methods are commonly used by South African private equity funds. Additionally, larger funds tend to co-invest with trusted partners as a key strategy for mitigating risk. The results also reveal that these larger funds more frequently utilize the enterprise value/earnings before interest and tax (EV/EBIT) ratio in their evaluation process. This study supports the Basel II recommendation, which suggests that adopting an audit and risk planning framework can help private equity firms identify the most critical risks and concentrate their risk management efforts accordingly. The survey’s overall results show that cash flow-volatility-based models and stress testing are the most widely utilized tools among the funds studied. This research contributes to the ongoing discourse on risk management in private equity, particularly in the context of South Africa’s emerging economy, offering new insights into a relatively underexplored area.

We analyze the determinants of buyout funds' investment decisions. We argue that when there is imperfect competition for private equity funds, the timing of funds' investment decisions, their risktaking behavior, and their subsequent returns depend on changes in the demand for private equity, conditions in the credit market, and fund managers' ability to influence perceptions of their talent. We investigate these hypotheses using a proprietary dataset of 207 U.S. buyout funds that invested in 1,957 buyout targets over a 30-year period. Our dataset contains precisely dated cash inflows and outflows in every portfolio company, links every buyout target to an identifiable buyout fund, and is free from reporting and survivor biases. Thus, we are able to characterize every buyout fund's precise investment choices. Our findings are as follows. First, established funds accelerate their investment flows and earn higher returns when investment opportunities improve, competition for deal flow eases, and credit market conditions loosen. Second, the investment behavior of first-time funds is less sensitive to market conditions. Third, younger funds invest in riskier buyouts, in an effort to establish a track record. Finally, following periods of good performance, funds become more conservative, and this effect is stronger for first-time funds.

Whether ethical screening affects portfolio performance is an important question that is yet to be settled in the literature. This paper aims to shed further light on this question by examining the performance of a large global sample of Islamic equity funds (IEFs) from 1984 to 2010. We find that IEFs underperform conventional funds by an average of 40 basis points per month, consistent with the underperformance hypothesis. In line with popular media claims that Islamic funds are a safer investment, IEFs outperformed conventional funds during the recent banking crisis. However, we find no such outperformance for other crises or high volatility periods. Based on fund holdings-based data, we provide evidence of a negative curvilinear relation between fund performance and ethical screening intensity, consistent with a return trade-off to being more ethical.

This Article offers a broad theory of what distinguishes investment funds from ordinary companies, with ramifications for how these funds are understood and regulated. The central claim is that investment funds (i.e., mutual funds, hedge funds, private equity funds, and their cousins) are distinguished not by the assets they hold, but by their unique organizational structures, which separate investment assets and management assets into different entities with different owners. In this structure, the investments belong to \"funds,\" while the management assets belong to \"management companies.\" This structure benefits investors in the funds in a rather paradoxical way: it restricts their rights to control their managers and to share in their managers' profits and liabilities. The fund investors accept these restrictions because certain features common to most investment funds make these restrictions efficient. Those features include powerful investor exit rights that substitute for control rights and economies of scope and scale that encourage managers to operate multiple funds at the same time. This understanding illuminates a number of key areas of contracting and regulation and refutes the claims of skeptics who say that fund investors would be better off if they employed their managers directly.

Many important areas of the law place great confidence in the ability of contracting parties to bargain effectively. In this Article, I question the wisdom of a formalistic faith in bargaining by identifying flaws in the bargaining process at the high end of the market, where parties are sophisticated and have substantial resources to aid them in bargaining.

PurposeThis paper aims to explore the impact of the COVID-19 pandemic on the market timing skills of Islamic equity funds in Asia, Europe and North America.Design/methodology/approachThe authors employed a two-step process. First, a Granger causality test is applied to test the bivariate relationship between Islamic fund indices and stock market ones by highlighting the impact of the COVID-19 pandemic. Second, the methodology of Treynor and Mazuy (1966) is deployed to account for the market timing abilities skills of Islamic fund managers during the pandemic period.FindingsThe investigation revealed mixed results. The European Islamic funds were positively impacted by the stock market as well as by the COVID-19 pandemic context. Additionally, compared to their Asian and North American peers, only European Islamic fund managers have the ability to time the market during the health crisis period.Research limitations/implicationsDespite its contribution to the Islamic finance literature, this study has some flaws. Indeed, the selected sample of three regions, namely Asia, Europe and North America, precludes extrapolating these conclusions. Other regions should be investigated to further our understanding of Islamic equity funds. Furthermore, due to data availability and accessibility, the study period was limited to a specific time of the COVID-19 pandemic. This shortcoming can be addressed through a multiwave investigation, especially since each region was exposed differently to the pandemic.Practical implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic fund managers across the three regions would serve as a guide to identifying the most suitable internationally focused investment strategy.Social implicationsThe paper provides scholars, portfolio managers and investors with insights regarding the investment dilemma during the COVID-19 pandemic period, especially for those wishing to hedge their pandemic risk exposure and/or diversify their portfolios. Equally, the depiction of potential market timing abilities of Islamic funds managers across the three regions would serve as a guide to identify the most suitable internationally focused investment strategy.Originality/valueThe originality of this investigation is that it is the first to examine Islamic equity fund managers and their skills to time the stock markets during the COVID-19 pandemic period in Asia, Europe and North America. The current paper extends the Islamic finance literature.

In recent years, the investment of private equity funds in China has increased and has become an important tool to promote industrial structure upgrades. Therefore, it is of theoretical and practical significance to study how and why industrial upgrades are driven by private equity funds. First, we use the understanding of heterogeneity to study the differences between the use of private equity funds and other financial instruments to stimulate industrial upgrades, and we represent industrial growth from two perspectives: economic aggregate growth and economic efficiency improvement. Next, we use shift-share analysis to disaggregate industrial upgrades into static and dynamic transfer effects, showing that other financial instruments only promote production factor mobility but not production efficiency, while private equity funds significantly contribute to both mobility and efficiency. Finally, the mediating effect model is used to study how private equity funds drive industrial upgrades: mainly from efficiency improvement based on technological progress and innovation output, and to a lesser extent from the promotion of factor mobility. The findings have practical value and implications for the optimization of financial reforms and the sustainability of regional economies.

This study aims to understand the effect of the human resources and investor composition of venture funds on fund performances in Korea. It was conducted on 235 venture funds and revealed that the fund manager retention period, retention rate and investors’ number affected fund performance. Blind funds showed the same results with overall funds, whereas project funds, performance was affected only by the fund manager retention period. Funds operated by general partners, which manpower is not major shareholders, showed the same result as the overall ones. This study provides the basis for government planning venture policies and investors establishing funds’ evaluation criteria.

The use of private equity has increased rapidly. The number of companies backed by private equity funds in the US doubled from 2006 to 2017. Private equity net asset value has grown at twice the rate of public market capitalization globally. Here, Rene M. Stulz's study, Public versus Private Equity, is discussed.