RT Journal Article
SR Electronic
T1 The Venture Capital Premium: <em>A New Approach</em>
JF The Journal of Private Equity
FD Institutional Investor Journals
SP 7
OP 18
DO 10.3905/jpe.2015.18.3.007
VO 18
IS 3
A1 Luis E. Pereiro
YR 2015
UL https://pm-research.com/content/18/3/7.abstract
AB We introduce a novel method to estimate the risk premium that investors should demand on top of public equity’s return to be properly compensated for the peculiar hazards of investing in venture capital. Unlike existing CAPM-based methods, our benchmarks are based upon direct measures of the factors that affect the value of venture capital portfolios—i.e., illiquidity, hazard of failure and control; being, at the same time, clear of the confounding effects of superior fund management. Our method is an empirically grounded alternative to the rules of thumb employed by institutional investors and fund managers when defining target returns on venture capital.TOPICS: Private equity, analysis of individual factors/risk premia, statistical methods, portfolio construction