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Korean Journal of Financial Studies 2013;42(1):47-78.
Published online February 28, 2013.
Performance and Risk Profile of Private Equity Funds and Private Equity Fund-of-Funds in Korea
Kaun Y. Lee, Cheol Ho Han
Private Equity Fund-of-Funds를 활용한 기관투자자의 PE 투자전략에 관한 연구
이관영, 한철호
Abstract
Private equity (i.e., venture capital and buyout funds) is now contributing a greater amount of the capital to financial markets. This paper examines three strategies of PE investments with the performance data of venture capital funds between 1987 and 2010. Business cycle strategy suggests that investors need to change investment sizes or strategies when the business cycle moves through the various phases. Not based on the sufficient data and not statistically significant, the result shows that venture capital funds established during challenging economic environments create more value. The performance transition matrix is used to test the track record investing strategy. Although investors may attribute a manager`s top ranking to superior knowledge and skill, investors cannot use past returns to predict future winners in Korea. However, investors rely on guides like the past track records of managers when the performance data of liquidated funds are cumulated. The PE fund-of-funds strategy, which has a portfolio of funds, shows that a portfolio has reduced risk in comparison to a single PE funds investment. The diversification effect is made larger by increasing the investing periods (longer vintage year) and/or increasing the number of PE fund investments. The simulation result suggests that portfolios with longer vintage years and more invested funds (e.g., [4v9f], [7v4f]) should have almost no risk of losing the initial capital.
Key Words: 운용성과,한국모태펀드,Korea Fund-of-Funds,PE 투자전략,PE 펀드,PE Fund,PE Fund-of-Funds,PE Investment Strategy,Performance of PE Fund-of-Funds
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