7/28/2020 — We contend that the decision between public and private ownership can be understood in a cost-benefit framework where firms trade-off the governance benefits of private ownership with the potentially lower capital costs of public ownership. Consequently, ownership structure can be understood by examining the governance model that maximizes firm value. We discuss the conditions under which firms maximally benefit from private ownership, and argue that the “governance engineering” by private equity sponsors can ultimately explain the continued rise of private markets to the detriment of public markets.

• KEYWORD(S):
• private equity
• venture capital

1/25/2017 — On October 14, 2016, the Frank Hawkins Kenan Institute of Private Enterprise at the University of North Carolina Kenan-Flagler Business School hosted a conference titled What’s Next, America. Convened fewer than four weeks prior to the presidential election, the objective of the forum was to allow influential business leaders, academics and policy makers to examine issues critical to the U.S. economy now and in the future. The conference offered actionable solutions to the most important economic issues facing the next administration.

• KEYWORD(S):
• aging
• inclusive development
• inequality
• innovation

12/7/2017 — On October 27, 2017 the Frank H. Kenan Institute of Private Enterprise (Kenan Institute) hosted The Business of Healthcare: Adapting to an Aging Economy at UNC Kenan-Flagler Business School in Chapel Hill, North Carolina. The conference brought together more than 100 attendees representing the diverse interests and perspectives of health care and elder care organizations, medical and pharmaceutical companies, patient advocacy organizations, government agencies and the academic research sector.

• KEYWORD(S):
• aging
• disruptive demographics

2/25/2021 — We propose and test a framework of private information acquisition and decision timing for asset allocators hiring outside investment managers. Using unique data on due diligence interactions between an institutional allocator and 860 hedge fund managers, we find that the production of private information complements public information. The allocator strategically chooses how much proprietary information to collect, reducing due diligence time by 18 months and improving outcomes. Selected funds outperform unselected funds by 9% over 20 months. The outperformance relates to the allocator learning about fund return-to-scale constraints and manager skill before other investors.

• KEYWORD(S):
• hedge funds

7/7/2020 — We propose a method for decomposing private fund portfolio performance into effects from timing, strategy selection, geographic focus, sizing of fund allocation, and fund selection attributes.

• KEYWORD(S):
• investments
• private equity

6/7/2020 — This paper provides the first large-sample analysis of buyout and venture capital fund values over their lifetimes. Specifically, we examine interim fund investment multiples (TVPIs), internal rates of return (IRRs), and direct-alphas based on the current reported net asset values (NAVs) at each quarter of a fund’s life.

• KEYWORD(S):
• private equity

3/16/2020 — Using a comprehensive and proprietary dataset on international private equity activity, we study the determinants of buyout investments across 61 countries and 19 industries over the period of 1990-2017. We find evidence that macroeconomic conditions, development of stock and credit markets, and the regulatory environment in a country are important drivers of international buyout capital flows.

• KEYWORD(S):
• private equity
• venture capital

1/22/2020 — Private equity performance, both for buyouts and venture capital, has been highly cyclical: periods of high fundraising have been followed by periods of low performance. Despite this seemingly predictable variation, we find modest gains, at best, to pursuing realistic, investable strategies that time capital commitments to private equity. This occurs, in part, because investors can only time their commitments to funds; they cannot time when commitments are called or when investments are exited. There is a high degree of time-series correlation in net cash flows even across commitment strategies that allocate capital in a very different manner over time.

• KEYWORD(S):
• private equity
• venture capital

1/7/2020 — This paper provides a first look at newly available data on the holdings of private equity (PE) funds. Because research has been hampered by the lack of comprehensive, high-quality data on portfolio companies, this new source offers the potential for a wide range of research.

• KEYWORD(S):
• private equity
• venture capital

10/16/2019 — The last 20 years have been a period of tremendous growth for the PE industry. From its roots in the 1970s and 80s in the buyout and venture capital spaces, private capital has expanded dramatically in both scope and scale. Funds have gotten larger, the investor pool has broadened and the largest players have transformed themselves into fully diversified alternative asset managers, with offerings across a wide range of geographies and asset classes.

• KEYWORD(S):
• finance
• private equity

9/12/2019 — Except for relatively short but intense episodes of high market risk, average idiosyncratic risk (IR) falls steadily after 2000 until almost the end of our sample period in 2017. The decrease has been such that from 2012 to 2017 average IR was lower than any time since 1965.

• KEYWORD(S):
• finance

7/29/2019 — Using a novel dataset on global private equity investments in 19 industries across 52 countries, we find that labor productivity, employment, profitability, and capital expenditures increase for publicly-listed companies in the same country and industry as private equity investments. Our results show that positive externalities created by private equity firms are absorbed by other companies within the same industry.

• KEYWORD(S):
• private equity
• venture capital

5/6/2019 — In a recent paper, “Demystifying Illiquid Assets – Expected Returns for Private Equity,” Ilmanen, Chandra and McQuinn (of AQR) give a perspective on the past, present, and expected future performance of private equity. They conclude that “private equity does not seem to offer as attractive a net-of-fee return edge over public market counterparts as it did 15-20 years ago from either a historical or forward-looking perspective.” This analysis provides our perspective based on more recent and, we think, more reliable data and performance measures – the historical perspective is more positive than Ilmanen et al. portray.

3/1/2017 — This article examines the historical relation between oil price movements and both public and private equity investments in the energy sector. By utilizing two proprietary private equity databases (one at the fund level and the other at the company level), the authors are able to show that investments in energy-focused private equity offer diversification benefits relative to similarly focused public equity and direct energy commodity investments. They find that public equity investments perform better than direct investments in energy commodities. Energy-focused private equity outperforms energy-focused public equity.

• KEYWORD(S):
• private equity

8/1/2015 — We explore the determinants of equity price risk of nonfinancial corporations. Operating and asset characteristics are by far the most important determinants of risk. For the median firm, financial risk accounts for only 15% of observed stock price volatility. Furthermore, financial risk has declined over the last 3 decades, indicating that any upward trend in equity volatility was driven entirely by economic risk factors. This explains why financial distress (as opposed to economic distress) was surprisingly uncommon in the nonfinancial sector during the 2007–2009 crisis even as measures of equity volatility reached unprecedented highs.

• KEYWORD(S):
• finance
• private equity
• risk management

12/1/2012 — The authors find that hedge funds during the 2008 financial crisis did not systematically benefit from opportunistic trading, which could have generated systemic risks in financial markets. Although some funds that used leverage actually performed worse than expected given ex ante risk-factor loadings, this result was most likely caused by meeting redemptions rather than by forced selling during the crisis.

• KEYWORD(S):
• finance
• hedge funds
• risk management

7/19/2012 — U.S. stocks are more volatile than stocks of similar foreign firms. A firm's stock return volatility can be higher for reasons that contribute positively (good volatility) or negatively (bad volatility) to shareholder wealth and economic growth. We find that the volatility of U.S. firms is higher mostly because of good volatility

• KEYWORD(S):
• finance
• investments

8/1/2011 — Using a large sample of nonfinancial firms from 47 countries, we examine the effect of derivative use on firm risk and value. We control for endogeneity by matching users and nonusers on the basis of their propensity to use derivatives. We also use a new technique to estimate the effect of omitted variable bias on our inferences. We find strong evidence that the use of financial derivatives reduces both total risk and systematic risk. The effect of derivative use on firm value is positive but more sensitive to endogeneity and omitted variable concerns. However, using derivatives is associated with significantly higher value, abnormal returns, and larger profits during the economic downturn in 2001–2002, suggesting that firms are hedging downside risk.

• KEYWORD(S):
• finance
• global business
• private equity

9/1/2023 — General Partners (GPs) in private equity face a trade-off between focusing their skills and effort on fewer investments to earn higher returns, or investing more broadly to reduce risk through diversification. Using a novel, deal-level dataset of 5,925 global investments from 1999 to 2016, we show that these portfolio considerations are important for understanding fund-level private equity returns.

• KEYWORD(S):
• finance
• private equity

6/1/2023 — Throughout 2022, the Kenan Institute at UNC-Chapel Hill explored how ESG factors enter into and play a role in the decisions of corporate managers and investors. We have framed this analysis within the broader notion of “stakeholder capitalism,” a model in which business decisions reflect explicit consideration of their expected impact on a broader set of corporate stakeholders.

• KEYWORD(S):
• esg
• finance
• stakeholder capitalism

3/1/2018 — On January 18 and 19, 2018, the Frank H. Kenan Institute of Private Enterprise (Kenan Institute) hosted its Frontiers of Entrepreneurship Research Conference at The Breakers Palm Beach Resort. The conference brought together more than 100 academic research scholars, policy experts and private sector professionals to discuss and debate the most challenging current issues in the field of entrepreneurship in order to set the agenda for future research and policy.

• KEYWORD(S):
• strategy and entrepreneurship

1/8/2021 — We specify and estimate a time-varying Markov model of COVID-19 cases for the US in 2020. We find that the estimated level of undetected infections spiked in March and remained elevated through May. However, since late April estimated undetected infections have generally declined though it was not until June or July that detected cases exceeded the estimated number of undetected cases. 

• KEYWORD(S):
• covid-19

4/7/2020 — We apply advances in analysis of mix frequency and sparse data to estimate “unsmoothed” private equity (PE) Net Asset Values (NAVs) at the weekly frequency for individual funds. Using simulations and a large sample of buyout and venture funds, we show that our method yields superior estimates of fund asset values than a simple approach based on comparable public asset and as-reported NAVs.

• KEYWORD(S):
• private capital
• private equity
• venture capital

8/20/2020 — The authors provide an overview of the main accomplishments of private equity since the emergence of leveraged buyouts in the 1980s, and of the challenges now facing the industry—challenges that have been encountered before during three major growth waves and two full boom-and-bust cycles.

• KEYWORD(S):
• finance
• private equity
• strategy and entrepreneurship

5/30/2018 — We examine the link between endowment investment performance and the expertise of university board members. Harnessing detailed information on 11,019 members for 579 universities, we find that expertise in alternatives and larger professional networks are associated with higher allocations to alternatives and better investment results.

• KEYWORD(S):
• hedge funds
• infrastructure
• private equity
• real estate
• venture capital

6/1/2017 — An experienced investment committee can put an institution on course to gain higher endowment returns.

• KEYWORD(S):
• finance

2/2/2019 — Using a large database of U.S. equity position-level holdings for hedge funds, we measure the degree of securitylevel crowdedness. The crowdedness factor is related to downside “tail risk" as stocks with higher exposure to crowdedness experience relatively larger drawdowns during periods of market distress. This tail risk extends to hedge fund portfolio returns as the crowdedness factor explains why some funds experience relatively large drawdowns.

• KEYWORD(S):
• hedge funds

4/29/2022 — We examine the links between human capital and endowment investing. Harnessing detailed information on university endowments, we find that higher asset allocations to alternative assets accompany higher levels of human capital in the endowment’s investment process. Moreover, high levels of human capital are linked to larger returns, even on a risk-adjusted basis.

• KEYWORD(S):
• investments
• private capital

3/11/2019 — On January 31 and February 1, 2019, the Frank H. Kenan Institute of Private Enterprise (Kenan Institute) hosted its Frontiers of Entrepreneurship Conference at The Breakers Palm Beach Resort. The conference brought together more than 150 academic research scholars, policy experts and private sector professionals to discuss and debate the most challenging current issues in the field of entrepreneurship in order to set the agenda for future research and policy.

7/18/2022 — This paper evaluates the pros and cons of including private equity fund investments in defined contribution plans. Potential benefits include higher returns and improved diversification as well as a relatively safe method for accessing investments previously only available to institutions and the very wealthy. Despite these enticing benefits, they need to be weighed against potential challenges and costs that may arise from creating this broader access to private funds. The complicated structure and uncertainty around the mechanism to provide required liquidity backstops may bring increased fees or even disrupt the private fund model.

• KEYWORD(S):
• private equity