The Correlation Between Private Equity Manager's Experience,Stock-picking Skill And Timing Skill

With the development of our investment environment,the private equity's management scale and market influence has been gradually improved.Academia and industry put more attention to this topic.However,the fund managers is the actual managers of private equity funds.So the investment ability of fund managers directly determines the performance of private equity.Past research mostly focus on the population characteristics,working time and the source of fund managers,while this paper try to explain this topic with the sight of life experience.This paper focus on the correlation between fund managers' experience,stock-picking skill and timing skill.The mechanism between private equity fund managers' past experience and their investment skill is essentially a "path dependence." Path dependence theory can explain the mechanism of correlation.This paper selects 579 private equity funds products(234 fund managers)which established before 2014 as research samples.These samples are divided into three groups:fund managers with industrial experience only(“industry groups”),fund managers with trading experience only(“trading group”)and the fund manager with both industrial experience and trading experience(“both group”).Based on path dependence theory,this paper considers that past experience will affect stock-picking skill and timing skill.The industry group should have a stronger stock-picking skill,while the trading group should have a stronger timing skill,“both group” should have stronger stock-picking skill than trading group and stronger timing skill than industry group.Choose TM model and the HM model to run the empirical analysis with the four full-year performance data from 2014 to 2017,and the stability test by market and by year.It is found that the industry group has a stock-picking skill and is stronger than the trading group;“both group” have the stock selection skill and are stronger than trading group;trading group has timing skill and is stronger than industry group only in unilateral positive market.