What is private equity?
Private capital markets play an increasingly important role in the U.S. and the broader economy, from private equity and venture capital to growth equity and private credit. Each asset class has economics that differ from its public-market counterpart. The closed-end fund, for example, introduces a host of contracting incentives and information challenges. Delegation therefore runs throughout research on private equity. Investors commit capital over long periods, with limited liability, liquidity, and information. Rather than relying on prices, they rely on valuations, often provided at managers' discretion. These stark differences from public markets form the foundation of this PhD session, which provides an overview of key themes in contemporary research and a framework for researchers exploring new and unanswered questions.
Reading packet
Read these three papers before the session.
- Brown, G. W., Lundblad, C. T., & Volckmann, W. (2025). Risk-Adjusted Performance of Private Funds: What Do We Know? Institute for Private Capital Working Paper. PDFPerformance and measurement
- Gompers, P., Kaplan, S. N., & Mukharlyamov, V. (2016). What Do Private Equity Firms Say They Do? Journal of Financial Economics 121(3), 449–476. PDFWhat sponsors do
- Ewens, M., & Farre-Mensa, J. (2022). Private or Public Equity? The Evolving Entrepreneurial Finance Landscape. Annual Review of Financial Economics 14, 271–293. PDFThe public-private boundary
Foundations
- Kaplan, S. N., & Schoar, A. (2005). Private Equity Performance: Returns, Persistence, and Capital Flows. Journal of Finance 60(4), 1791–1823.
- Kaplan, S. N., & Strömberg, P. (2009). Leveraged Buyouts and Private Equity. Journal of Economic Perspectives 23(1), 121–146.
- Metrick, A., & Yasuda, A. (2010). The Economics of Private Equity Funds. Review of Financial Studies 23(6), 2303–2341.
Methods
- Korteweg, A. (2019). Risk Adjustment in Private Equity Returns. Annual Review of Financial Economics 11, 131–152.
- Gupta, A., & Van Nieuwerburgh, S. (2021). Valuing Private Equity Investments Strip by Strip. Journal of Finance 76(6), 3255–3307.
- Korteweg, A., & Nagel, S. (2025). Risk-Adjusted Returns of Private Equity Funds: A New Approach. Review of Financial Studies 38(9), 2557–2601.
- Gredil, O. R., Griffiths, B., & Stucke, R. (2023). Benchmarking Private Equity: The Direct Alpha Method. Journal of Corporate Finance 81, 102360.
- Brown, G. W., Gredil, O. R., & Kaplan, S. N. (2019). Do Private Equity Funds Manipulate Reported Returns? Journal of Financial Economics 132(2), 267–297.
Real effects
- Sørensen, M., & Yasuda, A. (2023). Stakeholder Impact of Private Equity Investments. In Handbook of the Economics of Corporate Finance: Vol. 1 (Eckbo, Phillips, Sørensen, eds.), Elsevier, 299–341.
- Davis, S. J., Haltiwanger, J., Handley, K., Jarmin, R., Lerner, J., & Miranda, J. (2014). Private Equity, Jobs, and Productivity. American Economic Review 104(12), 3956–3990.
- Bernstein, S., & Sheen, A. (2016). The Operational Consequences of Private Equity Buyouts: Evidence from the Restaurant Industry. Review of Financial Studies 29(9), 2387–2418.
- Gupta, A., Howell, S. T., Yannelis, C., & Gupta, A. (2024). Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes. Review of Financial Studies 37(4), 1029–1077.
New markets and vehicles
- Chernenko, S., Erel, I., & Prilmeier, R. (2022). Why Do Firms Borrow Directly from Nonbanks? Review of Financial Studies 35(11), 4902–4947.
- Block, J., Jang, Y. S., Kaplan, S. N., & Schulze, A. (2024). A Survey of Private Debt Funds. Review of Corporate Finance Studies 13(2), 335–383.
- Balloch, C., Mainardi, F., Oh, S. S., & Vokata, P. (2025). Democratizing Private Markets? Private Equity Performance of Individual Investors. SSRN Working Paper 5319498.
- Abuzov, R., Gornall, W., Shive, S., Strebulaev, I. A., & Weisbach, M. S. (2025). Selling to Yourself: Continuation Funds in Private Equity. NBER Working Paper 34471.
- Nadauld, T. D., Sensoy, B. A., Vorkink, K., & Weisbach, M. S. (2019). The Liquidity Cost of Private Equity Investments: Evidence from Secondary Market Transactions. Journal of Financial Economics 132(3), 158–181.
Setup: objects, primitives, and data
What is private equity, institutionally and economically?
The object map (LPs, GPs, funds, portfolio companies, lenders, secondary buyers, continuation funds, retail wrappers), the fund lifecycle, and the asset-class taxonomy. Buyout is the baseline throughout.
Suggested readings · 3 papers
- Metrick, A., & Yasuda, A. (2010). The Economics of Private Equity Funds. Review of Financial Studies 23(6), 2303–2341.
- Kaplan, S. N., & Strömberg, P. (2009). Leveraged Buyouts and Private Equity. Journal of Economic Perspectives 23(1), 121–146.
- Korteweg, A., & Westerfield, M. M. (2022). Asset Allocation with Private Equity. Foundations and Trends in Finance 13(2), 95–204.
Risk, return, and measurement
What are the risk-adjusted returns to private equity, and how do we measure them without market prices?
Required pre-read Brown, G. W., Lundblad, C. T., & Volckmann, W. (2025). Risk-Adjusted Performance of Private Funds: What Do We Know? Institute for Private Capital Working Paper. PDF
In-class discussion Kaplan, S. N., & Schoar, A. (2005). Private Equity Performance: Returns, Persistence, and Capital Flows. Journal of Finance 60(4), 1791–1823. PDF
Suggested readings · 11 papers
- Korteweg, A. (2019). Risk Adjustment in Private Equity Returns. Annual Review of Financial Economics 11, 131–152.
- Korteweg, A., & Nagel, S. (2025). Risk-Adjusted Returns of Private Equity Funds: A New Approach. Review of Financial Studies 38(9), 2557–2601.
- Korteweg, A., & Nagel, S. (2016). Risk-Adjusting the Returns to Venture Capital. Journal of Finance 71(3), 1437–1470.
- Harris, R. S., Jenkinson, T., Kaplan, S. N., & Stucke, R. (2023). Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds. Journal of Corporate Finance 81, 102361.
- Gredil, O. R., Griffiths, B., & Stucke, R. (2023). Benchmarking Private Equity: The Direct Alpha Method. Journal of Corporate Finance 81, 102360.
- Brown, G. W., Gredil, O. R., & Kaplan, S. N. (2019). Do Private Equity Funds Manipulate Reported Returns? Journal of Financial Economics 132(2), 267–297.
- Gupta, A., & Van Nieuwerburgh, S. (2021). Valuing Private Equity Investments Strip by Strip. Journal of Finance 76(6), 3255–3307.
- Robinson, D. T., & Sensoy, B. A. (2016). Cyclicality, Performance Measurement, and Cash Flow Liquidity in Private Equity. Journal of Financial Economics 122(3), 521–543.
- Franzoni, F., Nowak, E., & Phalippou, L. (2012). Private Equity Performance and Liquidity Risk. Journal of Finance 67(6), 2341–2373.
- Berk, J. B., & DeMarzo, P. M. (2025). A Unified Theory of Delegated Capital Management. SSRN Working Paper 5939314.
- Erel, I., Flanagan, T., & Weisbach, M. S. (2024). Risk-Adjusting the Returns to Private Debt Funds. Working paper.
Ownership, governance, and real effects
How do sponsors generate returns, and what are the consequences for firms, workers, consumers, creditors, and competitors — who captures the surplus?
Required pre-read Gompers, P., Kaplan, S. N., & Mukharlyamov, V. (2016). What Do Private Equity Firms Say They Do? Journal of Financial Economics 121(3), 449–476. PDF
In-class discussion Sørensen, M., & Yasuda, A. (2023). Stakeholder Impact of Private Equity Investments. In Handbook of the Economics of Corporate Finance: Vol. 1 (Eckbo, Phillips, Sørensen, eds.), Elsevier, 299–341. PDF
Suggested readings · 7 papers
- Davis, S. J., Haltiwanger, J., Handley, K., Jarmin, R., Lerner, J., & Miranda, J. (2014). Private Equity, Jobs, and Productivity. American Economic Review 104(12), 3956–3990.
- Bernstein, S., & Sheen, A. (2016). The Operational Consequences of Private Equity Buyouts: Evidence from the Restaurant Industry. Review of Financial Studies 29(9), 2387–2418.
- Bernstein, S., Lerner, J., Sørensen, M., & Strömberg, P. (2017). Private Equity and Industry Performance. Management Science 63(4), 1198–1213.
- Bernstein, S., Lerner, J., & Mezzanotti, F. (2019). Private Equity and Financial Fragility during the Crisis. Review of Financial Studies 32(4), 1309–1373.
- Gupta, A., Howell, S. T., Yannelis, C., & Gupta, A. (2024). Owner Incentives and Performance in Healthcare: Private Equity Investment in Nursing Homes. Review of Financial Studies 37(4), 1029–1077.
- Acharya, V. V., Gottschalg, O. F., Hahn, M., & Kehoe, C. (2013). Corporate Governance and Value Creation: Evidence from Private Equity. Review of Financial Studies 26(2), 368–402.
- Guo, S., Hotchkiss, E. S., & Song, W. (2011). Do Buyouts (Still) Create Value? Journal of Finance 66(2), 479–517.
The public-private boundary, including private credit
Why are firms staying private longer, why has lending migrated from banks into private credit, and what happens as private assets move toward retail investors?
Required pre-read Ewens, M., & Farre-Mensa, J. (2022). Private or Public Equity? The Evolving Entrepreneurial Finance Landscape. Annual Review of Financial Economics 14, 271–293. PDF
Suggested readings · 8 papers
- Ewens, M., & Farre-Mensa, J. (2020). The Deregulation of the Private Equity Markets and the Decline in IPOs. Review of Financial Studies 33(12), 5463–5509.
- Chernenko, S., Erel, I., & Prilmeier, R. (2022). Why Do Firms Borrow Directly from Nonbanks? Review of Financial Studies 35(11), 4902–4947.
- Block, J., Jang, Y. S., Kaplan, S. N., & Schulze, A. (2024). A Survey of Private Debt Funds. Review of Corporate Finance Studies 13(2), 335–383.
- Balloch, C., Mainardi, F., Oh, S. S., & Vokata, P. (2025). Democratizing Private Markets? Private Equity Performance of Individual Investors. SSRN Working Paper 5319498.
- Stulz, R. M. (2020). Public versus Private Equity. Oxford Review of Economic Policy 36(2), 275–290.
- Doidge, C., Karolyi, G. A., & Stulz, R. M. (2017). The U.S. Listing Gap. Journal of Financial Economics 123(3), 464–487.
- Stafford, E. (2022). Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting. Review of Financial Studies 35(1), 299–342.
- Howell, S. T., Parker, D., & Xu, T. (2024). Tyranny of the Personal Network: The Limits of Arm's Length Fundraising in Venture Capital. NBER Working Paper 33080.
Private capital innovations
How does an illiquid, finite-life fund structure create demand for private-market liquidity mechanisms — secondaries, continuation funds, NAV lending, semi-liquid retail wrappers?
No required reading: a frontier block, discussed in class.
Suggested readings · 4 papers
- Nadauld, T. D., Sensoy, B. A., Vorkink, K., & Weisbach, M. S. (2019). The Liquidity Cost of Private Equity Investments: Evidence from Secondary Market Transactions. Journal of Financial Economics 132(3), 158–181.
- Abuzov, R., Gornall, W., Shive, S., Strebulaev, I. A., & Weisbach, M. S. (2025). Selling to Yourself: Continuation Funds in Private Equity. NBER Working Paper 34471.
- Albertus, J. F., & Denes, M. (2024). Private Equity Fund Debt: Agency Costs and Cash Flow Management. SSRN Working Paper 3410076.
- Ewens, M., & Faber, J. (2026). Liquid Claims on Illiquid Assets: The Economics of Retail Access to Private Markets. SSRN Working Paper 6524419.
Unanswered questions
What are the interesting unanswered questions in the field?