Using the universe of business development companies (BDCs), a unique publicly traded segment of U.S. Private Equity (PE), for the period 1998-2017, we provide the first in-depth examination of their performance and risk-adjusted characteristics and compare our results to contrasting evidence derived from recently developed time series proxies for unlisted PE returns. BDCs exhibit zero alpha, beta of one, and significant exposure to SMB, HML, and CMA factors of 0.5, 0.7, and -0.3, respectively. BDC performance and market beta are sensitive to fund size and leverage. We provide evidence that BDC returns capture both the asset selection and PE ownership elements of the unlisted PE investment strategy. Finally, an event study analysis shows that NAV disclosures become informative only after the adoption of the Statement of Financial Accounting Standards 157 (SFAS 157). We posit that BDCs provide a readily available market-based PE benchmark for use by regulators, market participants, and academics.
Business development companiesPrivate equityRisk-return characteristicsMarket-based performance measuresAppraisal-based performance measuresSFAS 157
Theodosis L. Kallenos、George P. Nishiotis
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University of Cyprus, Cyprus ,Central Bank of Cyprus, Cyprus
NETL
NSTL
Elsevier
