私人股本和战略资产配置文献翻译Word格式.docx

1、Private Equity and Strategic Asset AllocationPrivate equity is both an asset class and an investment strategy. Distinguishing between the private equity asset class and the private equity investment strategy can be confusing and creates challenges for the traditional approach to asset allocation. As

2、set allocation decisions should be based on the risk and return characteristics of the asset class, although in reality, most private equity decisions are based on the perceived risk and return characters of the available private equity vehicles. Public companies collectively form the public equity

3、asset class. Investors can gain exposure to the public equity asset class by purchasing shares of publicly traded companies or shares of investment vehicles, such as mutual funds, that purchase the public shares. Private （non-public） companies collectively form the private equity asset class. Invest

4、ors can gain exposure to the private equity asset class by purchasing shares of privately held companies or shares of investment vehicles, such as private equity funds, that purchase the non-public shares. A large number of private corporations are generally assumed to be public corporations, includ

5、ing Dunkin Donuts, Hertz, Linens-N-Things, Neiman-Marcus, and Toys-R-Us. Common reasons for being private include family owned businesses that have always been private, leverage buyouts, and venture start-ups still waiting to go public. From a modern portfolio perspective, ideally, one could invest

6、in a basket of all private corporations in which the weights of the companies in the basket are based on their true values. Such a basket with real-time pricing would include thousands of constituents and would be a true representation of the private equity asset class. In such a world, all value-we

7、ighted benchmarks would lead to very similar conclusions on the performance of the asset class. Unfortunately, this is not possible and, philosophically, not how most people conceptualize a private equity investment. When investors make an allocation to private equity, it is not a passive investment

8、 in the basket of all （or most） private companies that form the private equity asset class. Rather, for most investors, the allocation to private equity is an investment in a skill-based strategy, in which the two primary sub-strategies are leveraged buyouts and venture capital. One can carry out su

9、ch strategies directly or through an investment vehicle that carries out the investments on their behalf. Two primary investment 5 vehicles are engaged in these strategies traditional private equity funds and publicly listed companies. Unlike the straightforward return relationship, the risk relatio

10、nship between the asset class and the investment vehicle is not straightforward. The standard deviation of private equity “asset class” returns is not the same as the standard deviation of private equity “fund” returns, as individual funds have high amounts of idiosyncratic （investment specific） ris

11、k. For example, for the universe of large cap U.S. mutual funds, the average standard deviation of their returns is very similar to the standard deviation of the S&P 500, which is a byproduct of the tendency of most mutual funds to create portfolios with characteristics that mimic those of the bench

12、mark. For the universe of private equity funds, the average standard deviation of their returns should be considerably higher than the standard deviation of the private equity asset class due to the concentrated nature of private equity funds. This phenomenon of a wide dispersion of returns among pr

13、ivate equity funds is documented in Lerner, Schoar, and Wongsunwai 2007. Public equity investments often involve exposure to more than 1,000 public companies. While thousands of private companies collectively form the private equity asset class, private equity funds are more concentrated and often i

14、nvolve exposure to fewer than 15 private companies. The fragmented structure of the private equity market is such that private equity investors cannot fully diversify away private company specific risk; thus, all private equity investments are a mixture of systematic risk exposure to the private equ

15、ity asset class and private company specific risk. Asset allocation decisions are largely based on the expected return and standard deviation of the asset class. For most asset classes, it is relatively easy to invest in a passive or beta representation of the asset class. When it comes to the priva

16、te equity asset class, a passive investment with risk and return characteristics that mimic the risk and return characteristics of the total private equity asset class does not exist! Thus, as advocates of separating the beta （asset allocation） decision from the alpha （product） decision, we face a r

17、ather large dilemma should we base the beta decision on risk and return characteristics associated with the average private equity investment or the private equity asset class? We are forced to muddy the alpha-beta separation waters and use the risk and return characteristics that reflect the beta c

18、haracteristics that an investor could obtain through a particular method of private equity exposure. Fortunately for us, the type of private equity exposure used in this study listed private equity exposure provides exposure to thousands of private equity companies and moving forward as more private

19、 equity investments are securitized should be more reflective of the private equity asset class. As asset allocators contemplating the role of private equity in a strategic asset allocation, two strands of research are of particular interest: research on strategic asset allocations to private equity

20、 and research on the risk and return characteristics of private equity. Phalippou 2007a provides an excellent literature review and thoughtful commentary on a wide range of private equity investing issues. Relatively little guidance exists in the literature about an optimal strategic asset allocatio

21、n to private equity. According to the Private Equity Council, the average allocation to private equity from the 20 largest U.S. public and private pension plans was % and % respectively. In previous Ibbotson research, Chen, Baierl, and Kaplan 2002 studies the role of venture capital in a strategic a

22、sset allocation. Using data from Venture Economics on liquidated funds found that venture capital funds had an annual compounded return of % （compared to returns of % and % for . Large and Small stocks over the same 1960 to 1999 period）, an annual standard deviation of %, and a correlation with publ

23、ic equities of .04%, which leads to an allocation range of 2% to 9%. Swenson 2000 reports the historical （1982-1997） correlation between the Yale private equity portfolio and U.S. equity at .3. Grantier 2007 concludes that small cap stocks are a viable substitute for private equity. Yambao, Davis, a

24、nd Sebastian 2007 advocates using indices of publicly traded securities as proxies for illiquid asset classes such as private equity. Using Credit Suisse Warburg Pincus Global Post Venture Capital Index, coupled with a global CAPM approach similar to one used later in this paper, Yambao, David, and

25、Sebastian estimates the expected return of private equity at %, a standard deviation of %, and a correlation with public equity of .9 a correlation that is substantially higher than most other estimates, but consistent with our view that, over long time periods, returns to the public and private equ

26、ity asset classes should be similar. A slightly older version of the Yambao, Davis, and Sebastian 2007 capital market assumptions was used in Ennis and Sebastian 2004. Using mean-variance optimization, it finds that private equity only begins to enter efficient portfolios when equity allocations exc

27、eed 60%. Furthermore, it concludes, “Only moderate-size, equity-oriented funds with exceptional private equity investment skill, strong board-level support, and adequate staff resources should consider allocations of 10% or more.” Finally, in an annual update on the benefits of private equity, the C

28、enter for International Securities and Derivatives Markets （CISDM） Research Department writes, “Results show that traditional private equity indices may provide diversification and return benefits when 7 added to an existing stock and bond portfolio, as well as a stock, bond, and hedge fund portfoli

29、o.” The lack of agreement regarding the historical returns of the private equity asset class is the key reason that relatively little asset allocation guidance around private equity can be found in the literature. We, too, cannot escape the uncertainty surrounding the historical returns of private e

30、quity. The perception that the private equity asset class has significantly outperformed public equity is one of the drivers of the current interest in private equity. The National Venture Capital Association, in conjunction with Thomson, regularly report the performance of Thomson Financials US Pri

31、vate Equity Performance Index （PEPI）, in which the reported 10- and 20-year annualized returns approximately double those of the S&P 500. The perception that private equity has superior returns is also due to the exceptional performance of a few high profile private equity investors, such as Yale, a

32、nd the stellar returns of top quartile private equity funds that are often trumpeted in the press. The Private Equity Council, an industry trade organization, proclaims that from 1980 to 2005, top-quartile private equity firms had annualized net of fee returns of % （see Private Equity Council 2007）.

33、 Unfortunately, the average private equity investor experiences average private equity returns and not top quartile returns. Overall, the literature on private equity returns vs. public equity returns is mixed. Schmidt 2006 compares the historical performance of private equity investments against a benchmark of