The Money Weighted Return on Illiquid Investments: IRR Is Not the Answer

2015 ◽  
Author(s):  
Yindeng Jiang
Keyword(s):  
Illiquid Investments

On Hedge Fund Structures: Improving Allocation Models for Illiquid Investments

2010 ◽  
Vol 13 (3) ◽  
pp. 19-24 ◽  
Author(s):  
Andrew Kumiega ◽  
Mathew Lech ◽  
Ben Van Vliet
Keyword(s):  
Hedge Fund ◽  
Illiquid Investments

Intermediation in Private Equity: The Role of Placement Agents

2019 ◽  
Vol 55 (4) ◽  
pp. 1095-1116
Author(s):  
Matthew D. Cain ◽  
Stephen B. McKeon ◽  
Steven Davidoff Solomon
Keyword(s):  
Real Estate ◽  
Information Asymmetry ◽  
Private Equity ◽  
Abnormal Returns ◽  
Theoretical Predictions ◽  
Illiquid Investments ◽  
First Time ◽  
High Information

Intermediation in private equity involves illiquid investments, professional investors, and high information asymmetry. We use this unique setting to empirically evaluate theoretical predictions regarding intermediation. Using placement agents has become nearly ubiquitous, but agents are associated with significantly lower abnormal returns in venture and real estate funds, consistent with investor capture and influence peddling. However, returns are higher for buyout funds employing a top-tier agent and for first-time real estate and venture funds employing an agent, and are less volatile for agent-affiliated funds, consistent with a certification role. Our results suggest heterogeneous motives for intermediation in the private equity industry.

How Risky are Illiquid Investments?

CFA Digest ◽  
2005 ◽  
Vol 35 (3) ◽  
pp. 7-8
Author(s):  
Charles F. Peake
Keyword(s):  
Illiquid Investments

scholarly journals Traditional and Alternative Risk: Application to Hedge Fund Returns

2016 ◽  
Vol 7 (1) ◽  
pp. 5-33
Author(s):  
Claudio Boido ◽  
Antonio Fasano
Keyword(s):  
Stock Returns ◽  
Hedge Fund ◽  
Relative Advantage ◽  
Investment Policies ◽  
Fund Managers ◽  
Asset Class ◽  
Illiquid Investments ◽  
Hedge Fund Returns ◽  
Hedge Fund Performance ◽  
The Impact

This study compares the risk-adjusted performance of traditional and alternative investments. Instrumental to this design, we introduce a specific metric for assessing hedge fund performance, comprising both the relative advantage and the extra-risk of an alternative investment over a traditional one. We are concerned with the impact of the crisis. Common wisdom tells us that during phases of market euphoria, investors’ wishful thinking can make them overconfident of the high returns promised by the leveraged structures and the aggressive investment policies typical of this asset class; conversely, when the downturns hit, the “big bets”, taken by hedge fund managers, in risky and illiquid investments, can trigger severe losses in their investors’ portfolios. We found evidence that regime switches in stock returns emphasise the performance gap among the different fund investment policies; furthermore, some styles can effectively capitalise on managerial skill, outperforming traditional equity investment in terms of adjusted performance.

On Hedge Fund Structures:Improving AllocationModels for Illiquid Investments

2010 ◽  
pp. 101006063007038
Author(s):  
Andrew Kumiega ◽  
Mathew Lech ◽  
Ben Van Vliet
Keyword(s):  
Hedge Fund ◽  
Illiquid Investments

scholarly journals Financial Stability Regulation under Borrowing and Liquidity Externalities

2020 ◽  
Author(s):  
Flora Lutz ◽  
Paul Pichler
Keyword(s):  
Financial Stability ◽  
Investment Decisions ◽  
Liquidity Risk ◽  
Risky Assets ◽  
Optimal Amount ◽  
Pecuniary Externalities ◽  
Private Money ◽  
Money Creation ◽  
Illiquid Investments

Abstract We study financial stability regulation in an environment with pecuniary externalities and where banks face both a liability choice (between private money creation and long-term borrowing) and an asset choice (between liquid and illiquid investments). Return risk on illiquid assets gives rise to liquidity risk, because banks that learn to have low future returns find themselves unable to roll over “money-like” debt. Privately optimal borrowing and investment decisions by banks lead, in general, to socially inefficient outcomes. The nature of inefficiency depends critically on the degree to which liquidity risk is systemic: When risk is highly systemic, banks hold the socially optimal amount of liquid assets, but create an excessive amount of money and overinvest in risky assets; when risk is not highly systemic, banks hold too little liquidity, create insufficient private money, and underinvest in risky assets. Quantity- and price-based regulations to address the identified inefficiencies are discussed.

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