Review of Finance Vol. 27 No. 2 2023

Private Company Valuations by Mutual Funds

Vikas Agarwal¹; Brad Barber²; Si Cheng³; Allaudeen Hameed⁴; Ayako Yasuda²

¹ Robinson College of Business Georgia State University , · ² Graduate School of Management, UC Davis , · ³ Whitman School of Management, Syracuse University , · ⁴ NUS Business School, National University of Singapore ,

Abstract

Mutual fund families set and report values of their private startup holdings, which affect the fund net asset value (NAV) at which investors buy/sell fund shares. We test three hypotheses related to the valuation practice: (i) information cost/access, (ii) litigation risk, and (iii) strategic NAV management. Consistent with (i), families with larger PE holdings and/or stronger information access update valuations more frequently in the absence of public information releases, their updates co-move less with other families, and their fund returns jump less at follow-on financings. We find no support for hypotheses (ii) or (iii). We also find that high-PE-exposure funds are subject to greater financial fragility.

DOI

10.1093/rof/rfac037

Volume

27

Issue

2

Pages

693-738

Language

en

Sources

bibtex:phds-export.bib crossref openalex

Cite

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