Kathryn Harrigan

The Changing Face of Private Equity: How Modern Private Equity Firms Manage Investment Portfolios

Coauthor(s): Daniel Klier, Martin Welge.

Abstract:
This article presents a comprehensive analysis of private equity management models and outlines two distinct models: one being a traditional financial investor with focus on financial engineering and selective changes in the governance model of portfolio companies, the other representing a modern form of private equity seeking value creation through active ownership. Active investors are able to significantly outperform more traditional financial investors by realizing the proceeds of intervention in strategic decision making, while avoiding the costs of "corporate infrastructure."

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