Performance Measurement in Private Equity: Another Look

The author uses single period and multi-period regression analysis to measure the impact of public stock market returns on private equity returns. When contemporaneous and lagged market returns are included in the analysis, current valuations in private equity portfolios demonstrate considerable exposure to prior public equity returns. In addition, a large component of a private equity manger's alpha can be explained by non-synchronous public equity returns. Finally, private equity managers exhibit the behavior of managed pricing in the valuation of their portfolio holdings.