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Managing investment risks of institutional private equity investors: The challenge of illiquidity

Author

Listed:
  • Kaserer, Christoph
  • Wagner, Niklas
  • Achleitner, Ann-Kristin
Abstract
Since private equity investments are not publicly traded, a key issue in measuring investment risks of institutional private equity investors arises from a careful measurement of investment returns in the first place. Prices of private equity investments are typically observed at low frequency and are determined by transactions under low liquidity. This contribution highlights useful approaches to the problem of return measurement under conditions of illiquidity. Then, specific risk management issues, including asset allocation issues, are discussed.

Suggested Citation

  • Kaserer, Christoph & Wagner, Niklas & Achleitner, Ann-Kristin, 2003. "Managing investment risks of institutional private equity investors: The challenge of illiquidity," CEFS Working Paper Series 2003-01, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    • Handle: RePEc:zbw:cefswp:200301
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    References listed on IDEAS

    as
    1. Getmansky, Mila & Lo, Andrew W. & Makarov, Igor, 2004. "An econometric model of serial correlation and illiquidity in hedge fund returns," Journal of Financial Economics, Elsevier, vol. 74(3), pages 529-609, December.
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    12. Steven Kaplan & Antoinette Schoar, 2003. "Private Equity Performance: Returns, Persistence and Capital," NBER Working Papers 9807, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Buchner, Axel & Kaserer, Christoph & Wagner, Niklas, 2006. "Stochastic modeling of private equity: an equilibrium based approach to fund valuation," CEFS Working Paper Series 2006-02, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).

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    More about this item

    Keywords

    private equity; risk/return measurement; net asset values; cash flows; illiquidity; stale pricing; risk management; asset allocation;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services

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