Estimating Skill in Private Equity Performance Using Market Data

Are private equity fund managers that earn persistently higher returns truly skilled, or are they just lucky? Using a novel approach that overcomes concerns about the integrity of both the data and the empirical methods that have been commonly used in prior studies of private equity persistence and skill, I find evidence of skill for Buyout and Mezzanine fund managers, however the evidence is mixed for Venture and Funds-of Funds. I then show that preferred transaction type is a channel through which skilled private equity fund managers differentiate themselves from unskilled ones