The global industry of private equity has never had more capital to spend, and deals are at historically high valuations. Further, as COVID-19 is wrecking economic activities across the globe, it raises strong concerns on how private equity funds are expected to do in the event of a crisis.
Research into the intertwinement of macro conditions in ﬁnancial crisis events and private equity performance is predominantly limited to empirical analyses of the 07-09 crisis. This paper provides answers to how a ﬁnancial crisis might aﬀect private equity performance and examines how these results depend on the timing and severity of the crisis.
This paper builds on existing literature, establishing a theoretical framework enabling asset-based simulation for PE stakeholders returns under various exogenously deﬁned parameters. Introducing a deterministic crisis event allows for comparison between steady-state and crisis performance, providing insights on the impact of crisis statics.
The paper ﬁnds enhanced performance for private equity when investing during a crisis with a signiﬁcant recovery, regardless of fund characteristics. In the absence of a recovery period, fund characteristics, such as manager skill and leverage, become highly consequential for perfor-mance. These results provide basic insights which open up potential further investigations and considerations regarding private equity as an investment vehicle.
|Educations||MSc in Advanced Economics and Finance, (Graduate Programme) Final Thesis|
|Number of pages||145|