Macroeconomic Conditions and Private Equity Fund Returns—A Swiss Perspective

Using a hand-collected dataset of 531 private equity funds, the author shows that macroeconomic conditions influence private equity fund returns. He finds that weak economic growth, low corporate bond yields, and low stock market valuations during the period when investments are taking place favor r...

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Bibliographic Details
Published in:The journal of private equity 2017-01, Vol.21 (1), p.20-30
Main Author: Steger, Daniel
Format: Article
Language:English
Subjects:
Business cycles
Cash flow forecasting
Corporate bonds
Datasets
Economic growth
Equity
Equity funds
Frequency distribution
GDP
Gross Domestic Product
Growth rate
Independent variables
Institutional investments
Interest rates
Internal rate of return
Investment policy
Investors
Macroeconomics
Pension funds
Private equity
Rates of return
Securities markets
Studies
Success factors
Variables
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Summary:Using a hand-collected dataset of 531 private equity funds, the author shows that macroeconomic conditions influence private equity fund returns. He finds that weak economic growth, low corporate bond yields, and low stock market valuations during the period when investments are taking place favor returns. Moreover, a positive change in economic growth and rising stock market valuations over the lifetime of a fund also support private equity fund returns. For example, corporate bond yields and gross domestic product growth during the investment period together explain between 9% and 29% of the variance of the internal rates of return. Being robust to different sample periods, these results are consistent with prior research.
ISSN:1096-5572
2168-8508
DOI:10.3905/jpe.2017.21.1.020