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  • Journal of Financial Economics

The Disintermediation of Financial Markets: Direct Investing in Private Equity

By: Lily Fang, Victoria Ivashina and Josh Lerner
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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; Direct Investment; Co-investment; Private Equity; Entrepreneurship; Financial Markets

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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About The Authors

Victoria Ivashina

Finance
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Josh Lerner

Entrepreneurial Management
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  • Shanghai Pudong Science and Technology Investment Co., Ltd.: December 2014 By: Josh Lerner
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