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Coinvestment and risk taking in private equity funds

Handelshøgskolen ved UiS inviterer alle interesserte til åpent fagseminar hvor Carsten Gero Bienz fra NHH presenterer sin artikkel: Coinvestment and risk taking in private equity funds.

ÅPENT FAGSEMINAR VED HHUIS

Velkommen til åpent fagseminar tirsdag 3. mai kl 12:15-13:15 med Carsten Gero Bienz, NHH.

Sted: Handelshøgskolen ved UiS, Elise Ottesen-Jensens hus, rom EOJ-276

Coinvestment and risk taking in private equity funds

Abstract
Private equity fund managers are typically required to invest their own money alongside the fund. We examine how this coinvestment affects the acquisition strategy of leveraged buyout funds. In a simple model, where the investment and capital structure decisions are made simultaneously, we show that a higher coinvestment induces managers to chose less risky firms and use more leverage. We test these predictions in a unique sample of private equity investments in Norway, where the fund manager’s taxable wealth is publicly available. Consistent with the model, portfolio company risk decreases and leverage ratios increase with the coinvestment fraction of the manager’s wealth. Moreover, funds requiring a relatively high coinvestment tend to spread its capital over a larger number of portfolio firms, consistent with a more conservative investment policy.

 

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