Abstract: General partners (GPs) in private equity (PE) report the performance of an existing fund while raising capital for a follow-on fund. We document interim performance has large effects on fundraising outcomes; the impact is greatest when backed by exits and for low reputation GPs. Faced with these incentives, GPs time their fundraising to coincide with periods of peak performance through two strategies: “exit and fundraise” and “inflated valuations.” Consistent with the former, we find performance peaks are greatest for funds with high realization rates. Consistent with the latter, we find low reputation GPs with low realization rates also experience performance peaks followed by erosions in performance post-fundraising.
Bio: Ayako Yasuda is an Associate Professor of Finance at the Graduate School of Management, University of California, Davis. She was previously a faculty member in the finance department at the Wharton School of the University of Pennsylvania. Dr. Yasuda received a B.A. and Ph.D. in Economics from Stanford University. She has received numerous professional awards and has published in leading academic journals such as the Journal of Finance, Journal of Financial Economics, and the Review of Financial Studies. Her research has also been featured in leading media outlets such as The Financial Times, The Economist, The New York Times, and The Wall Street Journal. She co-authored an MBA course textbook Venture Capital and the Finance of Innovation, which has been adopted at many of the world’s top universities, including Chicago, Duke, Harvard, New York University, University of California (multiple campuses), University of Southern California, University of Pennsylvania (Wharton), and Yale. She is a Fellow of the Wharton Financial Institutions Center at University of Pennsylvania.
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