This thesis examines determinants of two variables important in evaluating private equity investments. First of them is the price of companies acquired by private equity funds expressed as a multiple of a profit indicator and the impact of primary and secondary buyouts. The second variable researched is the internal rate of return, a popular tool to measure profitability of private equity funds. The internal rate of return is studied for different groups of private equity funds and is reflected in a post-crisis perspective. The first conclusion stemming from the research is that the profit multiples in secondary buyouts are estimated to be higher compared to primary buyouts. The second conclusion proves the underperformance of real estate funds and the outperformance of distressed debt, turnaround and secondaries funds.

O objetivo desta dissertação é analisar a performance da indústria de fundos de investimentos em ações no Brasil. Alvo de poucos estudos no mercado nacional, a análise do desempenho da gestão de carteiras se faz cada vez mais importante, dado o avanço, ao longo dos últimos anos, dos fundos de investimentos como destino da poupança privada brasileira. As análises tradicionais, em que é testada individualmente a significância do alfa (intercepto) de regressões dos retornos dos fundos utilizando-se geralmente o CAPM ou o modelo de Fama-French (ou alguma variante destes), sofrem de diversos problemas, como a provável não-normalidade dos erros (73,8% em nossa amostra), e a não-consideração da correlação entre os alfas dos diversos fundos invalidando-se inferências tradicionais. O maior problema desta abordagem, porém, é que se ignora o fato de que, dentro de um universo grande de fundos, espera-se que alguns destes apresentem desempenho superior não por uma gestão diferenciada de suas carteiras, mas por mera sorte. A fim de superar esta dificuldade, o presente estudo, utilizando uma amostra de 812 fundos de ações durante o período 2002-2009 (incluindo-se fundos sobreviventes e não-sobreviventes), simulou a distribuição cross-sectional dos alfas (e de suas respectivas estatística-t) destes fundos através de técnicas de bootstrap, buscando-se com este procedimento eliminar o fator sorte nas análises. Os resultados foram de acordo com a literatura internacional, apresentando evidências da existência de pouquíssimos fundos com performance superior de fato, ao passo que um grande número de fundos apresentou um desempenho negativo, não por azar, mas por real gestão inferior. / The purpose of this dissertation is to examine the performance of the equity mutual funds industry in Brazil. Object of few studies in the national market, the performance analysis of active management has become increasingly more important, given the advance, especially over the last few years, of mutual funds as a destination of the Brazilian private savings. The traditional analysis, where the significance of the alpha (the intercept) from regressions of funds returns is tested individually, using generally the CAPM or the Fama-French model (or some variant of these), suffer from a large array of problems, from the non-normality of errors (73.8% in our sample) to the non-consideration of the correlation between the alphas of the various funds, invalidating the traditional inferences. The biggest problem regarding this approach, however, is that it ignores the fact that, in a large universe of funds, its expected that some funds will present superior performance not from differentiated management, but for mere luck. In order to address these shortcomings, the present study, using an extensive sample of 812 equity mutual funds during the 2002-2009 period (both surviving and non-surviving funds), simulates the cross-sectional distribution of alphas (and its-statistics) through bootstrap techniques, aiming with this procedure to eliminate the luck factor in the analysis. The results were in accordance with the international literature, showing evidences that only a few funds present actual superior performance, and a large number of funds present actual negative performance, not because they were unlucky, but due to inferior management.

Abstract Since Markowitz (1952) proposed modern portfolio theory to evaluate the correlation between investment returns and risk, a portfolio constructed by securities (mainly stocks and bonds) is called¡¨ security portfolio¡¨, which becomes popular and recognized to the financial market. Mutual funds are one of the security portfolios managed by investment professionals. To maximize the portfolio return by choosing a combination of stocks and bonds, to decide an adequate investment philosophy, strategy, process and asset reallocation, are key elements of obtaining considerable returns with limited risk and main standard of manifesting the quality and capability of fund managers. The past performance of funds is publicly available, which is scrutinized to decide what to purchase or redeem. Many studies about evaluation of portfolio performance focus on fund performance. Nevertheless recent researches focus on fund flows instead. In this study, we will examine variables that influence flows of open-ended equity mutual funds in Taiwan and have a better understanding of investor behaviors of purchasing or redeeming. We first identify variables that influence fund flows and then employee those to analyze the influence in between. We discovered that the investors are more zealous in chasing previous winners based on the short-term performance, approximately 3 to 6 months. However, once the performance of the invested fund improves for the past 12 months they trend to redeem shares to realize profit. Furthermore, they review risk before making the decision, but ignore it after investment. Investors incline to buy or sell funds of high £] and are more susceptible to related expenses and react negatively to funds that require high expense. Investors are significantly willing to invest funds that are actively traded.

O objetivo desta dissertação é analisar a performance da indústria de fundos de investimentos em ações no Brasil. Alvo de poucos estudos no mercado nacional, a análise do desempenho da gestão de carteiras se faz cada vez mais importante, dado o avanço, ao longo dos últimos anos, dos fundos de investimentos como destino da poupança privada brasileira. As análises tradicionais, em que é testada individualmente a significância do alfa (intercepto) de regressões dos retornos dos fundos utilizando-se geralmente o CAPM ou o modelo de Fama-French (ou alguma variante destes), sofrem de diversos problemas, como a provável não-normalidade dos erros (73,8% em nossa amostra), e a não-consideração da correlação entre os alfas dos diversos fundos invalidando-se inferências tradicionais. O maior problema desta abordagem, porém, é que se ignora o fato de que, dentro de um universo grande de fundos, espera-se que alguns destes apresentem desempenho superior não por uma gestão diferenciada de suas carteiras, mas por mera sorte. A fim de superar esta dificuldade, o presente estudo, utilizando uma amostra de 812 fundos de ações durante o período 2002-2009 (incluindo-se fundos sobreviventes e não-sobreviventes), simulou a distribuição cross-sectional dos alfas (e de suas respectivas estatística-t) destes fundos através de técnicas de bootstrap, buscando-se com este procedimento eliminar o fator sorte nas análises. Os resultados foram de acordo com a literatura internacional, apresentando evidências da existência de pouquíssimos fundos com performance superior de fato, ao passo que um grande número de fundos apresentou um desempenho negativo, não por azar, mas por real gestão inferior. / The purpose of this dissertation is to examine the performance of the equity mutual funds industry in Brazil. Object of few studies in the national market, the performance analysis of active management has become increasingly more important, given the advance, especially over the last few years, of mutual funds as a destination of the Brazilian private savings. The traditional analysis, where the significance of the alpha (the intercept) from regressions of funds returns is tested individually, using generally the CAPM or the Fama-French model (or some variant of these), suffer from a large array of problems, from the non-normality of errors (73.8% in our sample) to the non-consideration of the correlation between the alphas of the various funds, invalidating the traditional inferences. The biggest problem regarding this approach, however, is that it ignores the fact that, in a large universe of funds, its expected that some funds will present superior performance not from differentiated management, but for mere luck. In order to address these shortcomings, the present study, using an extensive sample of 812 equity mutual funds during the 2002-2009 period (both surviving and non-surviving funds), simulates the cross-sectional distribution of alphas (and its-statistics) through bootstrap techniques, aiming with this procedure to eliminate the luck factor in the analysis. The results were in accordance with the international literature, showing evidences that only a few funds present actual superior performance, and a large number of funds present actual negative performance, not because they were unlucky, but due to inferior management.

The first essay examines the joint determination of the contract for a private equity (PE) fund manager and the equilibrium risk premium of the PE fund. My model relies on two realistic features of PE funds. First, I model agency frictions between PE fund's investors and manager. Second, I model the illiquidity of PE fund investments. To alleviate agency frictions, compensation to the manager becomes sensitive to the PE fund performance, which makes investors excessively hold the PE fund to hedge the manager's fees. This induces a negative effect on the risk premium in equilibrium. For the second feature, I add search frictions in the secondary market for PE fund's shares. PE fund returns also contain a positive illiquidity premium since investors internalize the possibility of holding sub-optimal positions in the PE fund. Thus, my model delivers a plausible explanation for the inconclusive findings of the empirical literature regarding PE funds' performance. Agency conflicts deliver a lower risk-adjusted performance of PE funds, while illiquidity risk can raise it. In the second essay, coauthored with Andrew Ang and Pierre Collin-Dufresne, we investigate how often investors should adjust asset class allocation targets when returns are predictable and updating allocation targets is costly. We compute optimal tactical asset allocation (TAA) policies over equities and bonds. By varying how often the weights are reset, we estimate the utility costs of different frequencies of TAA decisions relative to the continuous optimal Merton (1971) policy. We find that the utility cost of infrequent switching is minimized when the investor updates the target portfolio weights annually. Tactical tilts taking advantage of predictable stock returns generate approximately twice as much value as those market-timing bond returns. In the third essay, also coauthored with Andrew Ang and Pierre Collin-Dufresne, we revisit the question of a pension sponsor's optimal asset allocation in the presence of a downside constraint and the possibility for the pension sponsor to contribute money to the pension plan. We analyze the joint problem of optimal investing and contribution decisions, when there is disutility associated with contributions. Interestingly, we find that the optimal portfolio decision often looks like a ``risky gambling" strategy where the pension sponsor increases the pension plan's allocation to risky assets in bad states. This is very different from the traditional prediction, where in economy downturns the pension sponsor should fully switch to the risk-free portfolio. Our solution method involves a separation of the pension sponsor's problem into a utility maximization problem and a disutility minimization one.

O objetivo central do presente trabalho é calcular os índices de desempenho dos fundos de ações no mercado brasileiro e determinar qual a probabilidade de que um fundo, que vinha apresentando bom desempenho em relação a seus pares, consiga manter esta posição no período seguinte. Como objetivos específicos buscou-se investigar quais índices de desempenho estão mais associados à expectativa de boa performance, se os gestores de fundos de ações no Brasil apresentam habilidade de se antecipar aos movimentos de alta e baixa na Bolsa de Valores e se estes gestores apresentam habilidades para selecionar as ações. A principal contribuição do trabalho é desenvolver um modelo para análise de fundos de investimento em ações no mercado brasileiro que possa ser utilizado pelos investidores, para selecionar os melhores fundos para aplicação de seus recursos. Buscou-se analisar quais métricas de desempenho são melhores para discriminar os fundos com bom desempenho, através da técnica estatística de regressão logística binária, cuja resposta permita estabelecer a probabilidade de ocorrência de fundos com desempenho superior e a importância das variáveis para essa ocorrência. A abordagem é inovadora. A matriz de classificação do modelo revelou um índice de acertos de 81% e as variáveis com significância estatística que entraram na equação, pela ordem de importância, foram: taxa de administração, índice de Treynor, índice de Sharpe generalizado, índice de Modigliani e taxa de performance. Os resultados da mensuração da habilidade de se antecipar ao mercado indicaram que 67,6% dos gestores apresentaram esta característica. A análise da habilidade dos gestores de fundos de ações brasileiros para selecionar as ações revelou que apenas 15% conseguiram obter seletividade positiva. Este resultado está em linha com os de outras pesquisas internacionais, tais como: Fama (1972), Sharpe (1992), Bollen e Busse (2005) e Fama e French (2009). / The main objective of this work is to calculate the performance measurements of equity funds in the market and determine the probability that a fund, which had shown good performance in relation to their peers, can maintain this position in the next period. The specific objectives sought to investigate what levels of performance are more closely associated with the expectations of good performance, if managers of equity funds in Brazil have timing abilities and if these managers have skills to select stocks. The main contribution of this work is to develop a model for the analysis of investment funds in stocks in the Brazilian market, which can be used by investors to select the best funds to invest their resources. Was analyzed what performance metrics are better to discriminate funds with good performance through the statistical technique of binary logistic regression, whose response would establish the likelihood of funds with superior performance and the importance of the variables for this occurrence. The approach is innovative. The classification matrix of the model revealed a hit rate of 81% and statistically significant variables that entered into the equation, in order of importance were: management fee, Treynor ratio, generalized Sharpe ratio, Modigliani ratio and performance fee. The results of measuring timing abilities indicated that 67.6% of managers had this skill. To analyze whether the Brazilian managers of equity funds had skills to select stocks revealed that only 15% of managers were able to obtain positive selectivity. This result is in line with results from other international studies, such as Fama (1972), Sharpe (1992), Bollen and Busse (2005) and Fama and French (2009).

Sammanfattning Antalet investeringsfonder och intresset för dessa har under de senaste åren ökat drama-tiskt. 94 % av den svenska befolkningen mellan 18-74 år sparar i någon form av fond. Un-der 2005 uppgick det totala fondkapitalet till ungefär 1,4 miljarder SEK. Det gör detta till ett viktigt ämne att studera vidare. Syftet med denna uppsats att analysera om det är något samband mellan förvaltningsavgif-ter, avkastning, riskjusterad avkastning och marknadsanpassad förvaltningsavgift och av-kastning i svenska aktiefonder. Vidare, skiljer sig prestationen mellan fonder beroende på om de är förvaltade av banker, listade som premiepensionsfonder eller förvaltade av andra fondbolag? För att analysera dessa frågor användes ’panel least square’ regressioner. Populationen bestod av 63 aktiefonder inom en tidsram av 20 kvartal. Dummy variabler användes för att särskilja bank- och premiepensionsfonder från den totala populationen. Observationerna visade liksom tidigare forskningen blandade resultat. Ingen relation hitta-des mellan avkastning, riskjusterad avkastning och förvaltningsavgift. Detta indikerar att fondbolagen inte tar hänsyn till den förväntade avkastningen när de fastställer sin förvaltningsavgift, vilket överensstämmer med tidigare forskning. Ett negativt samband hittades emellertid mellan den marknadsanpassade avkastningen och förvaltningsavgiften. Generellt presterade banker i genomsnitt bättre än fondbolag som varken var bank- och/eller premiepensionsfonder när det gäller avkastning, riskjusterad avkastning och marknadsanpassad avkastning. Vidare, fonderna med någon avgift utöver förvaltningsavgif-ten var de med den i genomsnitt näst sämsta gällande avkastning. / The number of investmentfunds have dramatically increased in the last years and so have the interest in funds. 94% of the Swedish population between 18-74 years are investing in some kind of mutual fund. In 2005 the total fund capital was approximately 1.4 billion SEK. That makes this an important topic to investigate further. Therefore this thesis purpose is to analyse if there is any relationship between administrationfees, returns, the risk-adjusted performances. Furthermore, does the performance of the Swedish mutual funds differ dependent on whether they are managed by banks or if they are listed as Premiepensionsmyndigheten (PPM) funds, or run by other mutual fund companies? To analyse the problem a panel least square regression was used. The population consisted of 63 Swedish mutual equity funds over 20 quarters. Dummy variables were used to separate the banks- and PPM funds from the total population. The findings are mixed compared to previous research. There seem to be no relationship between the return, the risk-adjusted return and the administration fee. This indicates that the fund companies do not set their administration fee based on the expected return. However, a negative relationship was found between the market-adjusted return and administration fee. In general, the banks, on average, outperformed, the mutual fund companies that were not bank and/or PPM funds, in return, risk-adjusted return and market-adjusted return. Further, the funds with some additional fee had the on average second lowest efficiency in terms of return on the market.

The traditional fund performance-evaluating measures rely on historical returns; however, this return-based performance measures are demonstrated with less precision but more biases than the holding-based measures by many studies. Therefore, the paper uses both return-based measure and holding-based measure by Cohen et al (2005). The equity fund samples begin from January 2004 to December 2008 with monthly returns and seasonally holdings of equity funds. The purpose of the study is to compare the predicting ability and information-containing ability between the four models: CAPM alpha model, Fama & French alpha model, CAPM holding based alpha model, and Fama & French holding based alpha model. At the end, the study analyzes the stock selection ability of Taiwan equity funds with the model which has the best predicting and information-containing power. The result shows that the best predicting power models are Fama & French model and CAPM model. Also, the best information-containing models for predicting future returns are Fama & French model and CAPM model. Thus, the study uses both Fama & French model and CAPM model to analyze the stock-picking ability of Taiwan equity funds. And we find that the funds have no stock selecting ability under Fama & French alpha model, but have the contrary results under CAPM alpha model. However, considering the number of the factors and the explanation of the two models, we conclude this paper with Fama & French model which shows Taiwan equity funds having no stock selection ability.

<p>Sammanfattning</p><p>Antalet investeringsfonder och intresset för dessa har under de senaste åren ökat drama-tiskt. 94 % av den svenska befolkningen mellan 18-74 år sparar i någon form av fond. Un-der 2005 uppgick det totala fondkapitalet till ungefär 1,4 miljarder SEK. Det gör detta till ett viktigt ämne att studera vidare.</p><p>Syftet med denna uppsats att analysera om det är något samband mellan förvaltningsavgif-ter, avkastning, riskjusterad avkastning och marknadsanpassad förvaltningsavgift och av-kastning i svenska aktiefonder. Vidare, skiljer sig prestationen mellan fonder beroende på om de är förvaltade av banker, listade som premiepensionsfonder eller förvaltade av andra fondbolag?</p><p>För att analysera dessa frågor användes ’panel least square’ regressioner. Populationen bestod av 63 aktiefonder inom en tidsram av 20 kvartal. Dummy variabler användes för att särskilja bank- och premiepensionsfonder från den totala populationen.</p><p>Observationerna visade liksom tidigare forskningen blandade resultat. Ingen relation hitta-des mellan avkastning, riskjusterad avkastning och förvaltningsavgift. Detta indikerar att fondbolagen inte tar hänsyn till den förväntade avkastningen när de fastställer sin förvaltningsavgift, vilket överensstämmer med tidigare forskning.</p><p>Ett negativt samband hittades emellertid mellan den marknadsanpassade avkastningen och förvaltningsavgiften.</p><p>Generellt presterade banker i genomsnitt bättre än fondbolag som varken var bank- och/eller premiepensionsfonder när det gäller avkastning, riskjusterad avkastning och marknadsanpassad avkastning. Vidare, fonderna med någon avgift utöver förvaltningsavgif-ten var de med den i genomsnitt näst sämsta gällande avkastning.</p> / <p>The number of investmentfunds have dramatically increased in the last years and so have the interest in funds. 94% of the Swedish population between 18-74 years are investing in some kind of mutual fund. In 2005 the total fund capital was approximately 1.4 billion SEK. That makes this an important topic to investigate further.</p><p>Therefore this thesis purpose is to analyse if there is any relationship between administrationfees, returns, the risk-adjusted performances. Furthermore, does the performance of the Swedish mutual funds differ dependent on whether they are managed by banks or if they are listed as Premiepensionsmyndigheten (PPM) funds, or run by other mutual fund companies?</p><p>To analyse the problem a panel least square regression was used. The population consisted of 63 Swedish mutual equity funds over 20 quarters. Dummy variables were used to separate the banks- and PPM funds from the total population.</p><p>The findings are mixed compared to previous research. There seem to be no relationship between the return, the risk-adjusted return and the administration fee. This indicates that the fund companies do not set their administration fee based on the expected return.</p><p>However, a negative relationship was found between the market-adjusted return and administration fee.</p><p>In general, the banks, on average, outperformed, the mutual fund companies that were not bank and/or PPM funds, in return, risk-adjusted return and market-adjusted return. Further, the funds with some additional fee had the on average second lowest efficiency in terms of return on the market.</p>

This research aims to identify the determinants of the ex-ante risk premium required by Italian private equity funds (PEFs) when valuing privately-held target companies. In theory, perceived risk is a key driver of expected returns and anticipated value, but: "Although PE (private equity) has experienced rapid growth, the risk and return profile of this asset class is not well understood." (Jegadeesh et al., 2009). Some papers have attempted to assess the ex post returns pioneered by Lerner & Gompers (1997). Yet such studies reveal both contradictory conclusions and hitherto inexplicable phenomena: what some authors call the 'private equity premium puzzle' (Moskowitz & Jorgensen, 2000). Such contradictory conclusions include a wide spread of abnormal realized returns ranging from -6% (Phalippou & Gottschalg, 2009) to +32% (Cochrane, 2005). In this research, the perceived risk and expected return drivers refer not to the ex-post realized return that PEF investors actually achieve, but to the required return the PEF hopes to gain from the target investment. At this stage, two important indicators adopted in PEF parlance have to be differentiated: (i) the Expected IRR (E.IRR) and (ii) the Threshold IRR (T.IRR). The first is the IRR as an output of a business plan, and the second assesses the return expected by PEFs according to the risk perceived in the business plan. Put simply, these are respectively, the anticipated return and the (risk-adjusted) required return. The study of the T.IRR is one of the main contributions of this thesis since it has never been studied before by academia as an indicator of the ex-ante perceived risk of a PEF target company. This is partly due to two important reasons. First, most previous papers examine ex-post performance, and only a few (e.g. Manigart et al., 2002), try to assess return expectations and risk perceptions using an ex-ante perspective. Second, most of the prior studies are quantitative and try to measure statistical effects captured by the ex-post IRR. By studying 26 deals (in 13 Italian PEFs) in detail (qualitatively and quantitatively), this research project has been able to observe how PEFs assess risk and estimate the T.IRR. The research project reveals that PEFs apply neither rational-based models nor explicit formulae to assess risk exante. By observing a set of phenomena unique to the PEF sector (fees effect, investment speed effect, persistence effect, money-chasing deal phenomenon, illiquidity effect, etc) whose existence has been suggested by many recent papers, this thesis has been able to propose an adjusted version of the three-factor model of Fama and French (1993, 1995) to assess risk. The application of a quasi-rational-based asset pricing model to guide PEFs assessments is also an important contribution of this thesis. In fact, Franzoni, Nowak and Phalippou (2010), claim to be the first to calculate the PEFs' cost of capital by applying asset pricing models. However, their approaches are not only based on the observations of realized returns, but also consider only one additional factor to the standard Fama & French three-factor model (1993), the liquidity factor. In contrast, the results and the model proposed by this thesis are based on qualitative and quantitative ex-ante information and include not only the classical factors of that model, but also some other factors intended to explain some of the phenomena listed above which might also drive the risk premium in private equity funds. Based, therefore, on explaining the behavior of PEFs, the research develops a framework that can be applied by Italian PEFs and perhaps other PEFs in a more rational manner than their past behavior suggests.