29
/ March
2013
Private equity beta: don't count on it being standardized
A new article in the Journal of Private Equity titled Systematic Risk Analysis of Listed Private Equity attempts to clarify cost of capital analyses for these private assets. The abstract of the article (which proves that academic writers often struggle to explain what they're talking about, if nothing else) says:
This study aims at dissecting the systematic risk of listed private equity (LPE) empirically through the decomposition of its beta. Instead of testing the assertion that LPE is a good proxy of unlisted private equity, the study intends to provide potential investors with better information regarding LPE’s systematic risk and to have a better reference to obtain the relevant cost of capital when evaluating individual LPE firm.