Mutual Funds as Venture Capitalists? Evidence from Unicorns / Sergey Chernenko, Josh Lerner, Yao Zeng.

By:

Chernenko, Sergey

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w23981.Publication details: Cambridge, Mass. National Bureau of Economic Research 2017.Description: 1 online resource: illustrations (black and white)Subject(s):

G23 - Non-bank Financial Institutions • Financial Instruments • Institutional Investors
G24 - Investment Banking • Venture Capital • Brokerage • Ratings and Ratings Agencies

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Abstract: Using novel contract-level data, we study the recent trend in open-end mutual funds investing in unicorns--highly valued, privately held start-ups--and the consequences of these investments for corporate governance provisions. Larger funds and those with more stable funding are more likely to invest in unicorns. Compared to venture capital groups (VCs), mutual funds have weaker cash flow rights and are less involved in terms of corporate governance, being particularly underrepresented on boards of directors. Having to carefully manage their own liquidity pushes mutual funds to require stronger redemption rights, suggesting contractual choices consistent with mutual funds' short-term capital sources.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w23981 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

October 2017.

Using novel contract-level data, we study the recent trend in open-end mutual funds investing in unicorns--highly valued, privately held start-ups--and the consequences of these investments for corporate governance provisions. Larger funds and those with more stable funding are more likely to invest in unicorns. Compared to venture capital groups (VCs), mutual funds have weaker cash flow rights and are less involved in terms of corporate governance, being particularly underrepresented on boards of directors. Having to carefully manage their own liquidity pushes mutual funds to require stronger redemption rights, suggesting contractual choices consistent with mutual funds' short-term capital sources.