Finance Group Seminar Series - Enrique Schroth

Enrique will be discussing his paper, 'Liquidity Provision in the Secondary Market for Private Equity Fund Stakes'

This paper studies liquidity provision in the secondary market for private equity fund stakes, in which discounts are pervasive and vary significantly over time and across different funds. Using proprietary data on bids between 2009 and 2016, we show that the demand response to common liquidity shocks varies considerably by investor or across fund types. On average, bids are lower when demand increases in response to low aggregate liquidity. This negative correlation is strongest for young funds, in times of high VIX and high funding costs, and for the demand by non-specialized investors. Our results suggest that illiquidity in the secondary market stems from funds with high costs of funding future capital calls, and that liquidity is provided by flexible investors that are not constrained to buy private equity off the secondary market.

With

Enrique Schroth is a Professor of Finance at Cass Business School, City, University of London, and a Research Fellow at the Centre for European Policy Research (CEPR). Before joining Cass in 2012, he was an Associate Professor of Finance at the Amsterdam Business School and an Assistant Professor at HEC Lausanne. He received his PhD in Economics from New York University in 2002.

His current research focuses on the valuation of the illiquidity risk in private equity and on the effects of long-term and short-term cash flow risk on corporate policies. His past research, in topics such as the illiquidity of controlling blocks, the determinants of bank runs and financial fragility, the control premium, and financial innovation has appeared in leading academic journals, including The Journal of Finance, the Journal of Financial Economics, the Review of Financial Studies and the Review of Finance. Enrique won the prize for the best symposium paper at the European Finance Association Conference in 2009 for his research on the relationship between the bankruptcy code and the return premium across countries.