Insights
Market Timing in Private Investments
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Insight Article
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January 15, 2021
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January 15, 2021
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Market Timing in Private Investments |
Summary
It is a well-known phenomenon that private market returns vary across vintage years. Moreover, as we show in our Post-Crisis Private Markets Investing paper, this variability is closely tied to market cycles. Historically, the performance of vintages that immediately follow the onset of market crises has been particularly strong. This is true on both an absolute basis, when compared to private market returns in other vintage years; and on a relative basis, when compared to public market performance in the same vintage years.
In this paper, we analyze whether GPs have been able to time the market and increase investments in favorable years. We conclude that GPs have not historically taken advantage of market timing and thus investors should increase their commitments in order to obtain the desired exposure to investments at favorable valuations.