Our speaker will be Neal Stoughton.

He will give a talk on "Discretionary NAVs".

The talk will take place at 12:00-13:00 in seminar room D4.0.039.

Abstract: A relatively recent trend is participation by leading mutual funds and fund families in the private equity market, which has opened the door of this segment of the economy to a broader set of investor participants. Funds have substantial discretion over the pricing of these investments and, in turn, net asset values. We examine strategic pricing behavior in a sample of 152 mutual funds with positions in 314 private firms. We find heterogeneity in fund family discretionary pricing decisions. Some funds are frequent revaluers while others are infrequent. Some funds are leaders, while others are followers. We find that private equity pricing is procyclical with respect to relative fund performance, which is consistent with the theoretical model. We also examine fund flows and observe that investors respond positively to reported private firm performance and appear to rationally anticipate predictable changes in private equity valuations.