Naslov
The Impact of the Internal Rate of Return (IRR) as a Benchmark Model for Value Creation in Private Equity
(The Impact of the Internal rate of Return (IRR) as a Benchmark Model for Value Creation in Private Equity)

Autori
Mišević, Petar ; Volarević, Hrvoje ; Perić, Marko

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Izvornik
Book of Procedings, Economic and Social Development, 48th International Scientific Conference / Prtygoda, Miroslaw ; Misevic, Petar ; Machrafi, Mustapha - Varšava : VADEA ; Sveučilište Sjever, 2019, 263-270

Skup
48th International Scientific Conference on Economic and Social Development Development

Mjesto i datum
Varšava, Poljska, 25.11.2019. - 26.11.2019

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
alternative asset ; endogenous shocks ; exogenous shocks ; internal rate of return , opportunity cost

Sažetak
The contribution of performance ratios on the capital markets goes along with the inconsistency of investors' expectations and deregulated premium of return for different asset classes on alternative markets. In the introduction part of the paper, the role of the multiple ratios related is highlighted as an applicable standard in the industry. In practice, performance fees, often derived by general partners, do not always take into consideration the concept of internal rate of return (IRR), as a benchmark model for value creation in private equity investors. Because of that, the multivarious conditions defined in the statute or the rule book of the equity entities should be examined under value creation perspectives. Conversely, from the perspective of prominent fund investors, there should be taken into calculation the standard of a carry for unrealised investments, market timing, utilisation of financial leverage, operational excellence, and residuals. Taking into consideration the perspectives above, authors of the paper have extracted the internal rate of return as a consistency ratio for four different horizons (a year, three years, five years and ten years) with the benchmarks from the Preqin Pro database. The authors intend to reassess alternatives according to best practices in the field of alternative asset class investments while offering alternative benchmarking methods as a measure of ranking fund performance via internal rate of return. In the discussion part of the paper, the model aims to define which alternative assets class or mechanism is affected by endogenous shocks (deregulation) or exogenous opportunities (consolidation) without going into the details. In the conclusion part, the authors shall summarise all useful findings related to the area of interest and studies in science and business.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija, Interdisciplinarne društvene znanosti

POVEZANOST RADA