The Disintermediation of Financial Markets: Direct Investing in Private Equity

Lily  Fang; Victoria  Ivashina; Josh   Lerner

Article | Journal of Financial Economics

The Disintermediation of Financial Markets: Direct Investing in Private Equity

by Lily Fang, Victoria Ivashina and Josh Lerner

Abstract

We examine twenty years of direct private equity investments by seven large institutions. These direct investments perform better than public market indices, especially buyout investments and those made in the 1990s. Outperformance by the direct investments, however, relative to the corresponding private equity fund benchmarks is limited and concentrated among buyout transactions. Co-investments underperform the corresponding funds with which they co-invest, due to an apparent adverse selection of transactions available to these investors, while solo transactions outperform fund benchmarks. Investors' ability to resolve information problems appears to be an important driver of solo deal outcomes.

Keywords: financial intermediation; private equity; direct investment; co-investment; Private Equity; Entrepreneurship; Financial Markets;

Format: Print

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Citation:

Fang, Lily, Victoria Ivashina, and Josh Lerner. "The Disintermediation of Financial Markets: Direct Investing in Private Equity." Journal of Financial Economics 116, no. 1 (April 2015): 160–178.

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The Disintermediation of Financial Markets: Direct Investing in Private Equity

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