Recent Developments in the Private Equity Market and the Role of Preferred Returns

Topics:
Commercial Banking,
Investment and Capital Markets
Tags:
Bank For International Settlements,
Finance,
Financial Services,
Investment,
Private Equity,
Return
Source:
Bank for International Settlements

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Overview: Private equity is generally considered the most expensive source of finance, sought by firms that cannot support debt because of their high risk, and that have severe information problems and little track record to attract public equity. Such firms have difficulty raising capital because of the intensive need for due diligence by investors, and active management for a substantial period of time before returns are realized. This analysis, considers carefully how preferred returns mitigate and exacerbate information problems between general and limited partners, drawing heavily from the literature on optimal contracting.

(Is this item miscategorized? Does it need more tags? Let us know.)

Format: PDF | Size: 92KB | Date: Jan 2002 | Pages: 25


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