Do Private Equity Managers Have Superior Information on Public Markets?

Abstract Using cash flows from a large sample of buyout and venture funds, I show that private equity (PE) distributions predict returns in the industries funds’ specialization. My tests distinguish timing skill reactions to market conditions spillover effects PE activity. Fund managers foresee comparable public firms’ earnings but sell at industry peaks only if they have performance fees harvest. These results implications for manager selection improve our understanding fund role capital markets.