Do Private Equity Funds Manipulate Reported Returns?

Jump to: navigation, search

Authors of the Article

  • Gregory W. Brown, University of North Carolina at Chapel Hill, Kenan-Flagler Business School
  • Oleg Gredil, Tulane University Freeman School of Business
  • Steven N. Kaplan, University of Chicago, Booth School of Business; National Bureau of Economic Research (NBER)

Publication Year



  • Private equity funds managers have an incentive to overstate their performance before raising new funds
  • Underperforming fund managers do overstate their performance
  • This does not seem to be successful as these managers are less likely than their peers to raise new funds
  • In opposite, overperforming fund managers are conservatives as they want to avoid being perceived as exaggerating their performances


"Some GPs of poorly performing funds appear to overstate NAVs around the time they would be attempting to raise a follow-on fund"
"We also find evidence of conservatism in valuations among the best performing funds. This is consistent with a concern on the part of GPs about being wrongly labeled as a firm that exaggerates NAVs."
"LPs do not assume the interim performance reports are unbiased; they punish GPs for the appearance of overstated performance by not providing capital to subsequent funds"