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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Illiquidity Premia in Private Equity Investments |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 139 |
| Date | 2020 |
| Abstract Text | With deal volumes reaching record levels, valuations rising rapidly and a built-up in dry-powder private equity has become an immensely attractive asset class. Reflected by the amplified interest from investors seeking to diversify portfolios, private equity can offer investors significant excess return. Private equity investments are highly illiquid with long investment horizons, a densely concentrated ownership structure and high levels of leverage. These market structures facilitate the formation of a premium arising from liquidity risks and information asymmetries. This paper seeks to quantify this illiquidity premium. Through applying similarity measures and unsupervised clustering algorithms, we form a liquid alternative - defined as a public peer benchmark - based on a multidimensional set of attributes. Thus we extract the illiquidity premium defined as the excess return over the benchmark and compute a median of 9.7%. |
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