We study the liquidity properties of private equity cash flows using data from 837 buyout and venture capital funds from 1984 to 2010. Most cash flow variation at a point in time is diversifiable — either idiosyncratic to a given fund or explained by the fund’s age. Both capital calls and distributions also have a procyclical systematic component. Distributions are more sensitive than calls, implying procyclical aggregate net cash flows. A consequence is that the well-known finding that funds raised in hot markets underperform in absolute terms is sharply attenuated when comparing to public equities. Consistent with a liquidity premium for calling capital in bad times, we find that funds with a relatively high propensity to do so perform better in both absolute and relative terms. Venture capital cash flows and performance are considerably more cyclical than buyout, and the links between cyclical cash flows and performance are likewise stronger.

NO WORLD CENTRAL BANK issues a separate currency for commerce across national boundaries. Instead, a system of national monies works more or less well in providing a medium of exchange and unit of account for current international transactions, as well as a store of value and standard of deferred payment for longer-term borrowing and lending. How do national governments and banking institutions interact to provide international money for merchants and investors? By necessity, this monetary interaction changes with time, place, political circumstances, and financial technology. To better understand its historical evolution, let us follow Robert Mundell and distinguish between a monetary system and a monetary order: