Theses Doctoral

Essays in Private Capital

Mittal, Vrinda

This thesis titled ``Essays in Private Capital" comprises of three essays focused on various parts of private capital. Private capital, also known as alternative assets are non-traded, broadly defined as private equity, real estate, venture capital, hedge funds, infrastructure and natural resource investments. The first chapter studies private equity, the second focuses on residential real estate, and the third is on commercial real estate. These are important asset classes given the low interest rate environment, and the recent COVID-19 and Silicon Valley Bank crisis which had large exposures to private assets.

The first essay titled ``Desperate Capital Breeds Productivity Loss: Evidence from Public Pension Investments in Private Equity" studies investor heterogeneity in private equity and its ultimate effect on target firms. Using novel micro-data on individual investments in private equity funds funds and buyout deals combined with confidential Census data, I show that capital contributed by the most underfunded U.S. public pensions decreases efficiency at target firms, as pensions fuel the growth of low quality, new entrant private equity funds. These results get stronger post the financial crisis, when underfunded positions and their subsequent investments in private equity increased. The paper shows that traditionally positive post buyout efficiency results turn negative in recent years, as marginal investors matching with marginal private equity funds pull down the average. The most underfunded pensions also realize lower total private equity returns relative to the least underfunded ones. These results suggest possibility of a ``funding doom loop" as currently public pensions use assumed return on assets to calculate liabilities.

The second essay titled ``Flattening the Curve: Pandemic-Induced Revaluation of Urban Real Estate" focuses on work from home with the onset of the COVID-19 pandemic and its effect on residential real estate prices across the U.S. We show that the COVID-19 pandemic brought house price and rent declines in city centers, and price and rent increases away from the center, thereby flattening the bid-rent curve in most U.S. metropolitan areas. Across MSAs, the flattening of the curve is larger where working from home is more prevalent, housing markets are more regulated, and supply is less elastic. Using a model predicting future residential price and rent evolution, we show urban revival in housing markets for the foreseeable future with urban rent growth exceeding suburban rent growth, as working from home recedes.

In the third essay titled ``Work From Home and the Office Real Estate Apocalypse", we show remote work led to large drops in lease revenues, occupancy, lease renewal rates, and market rents in the commercial office sector. We revalue New York City office buildings taking into account both the cash flow and discount rate implications of these shocks, and find a 39% decline in long run value. For the U.S., we find a $413 billion value destruction. We show evidence of flight to quality, as higher quality buildings are buffered against these trends, while lower quality office is at risk of becoming a stranded asset. These valuation changes have repercussions for local public finances and financial stability.


  • thumnail for Mittal_columbia_0054D_17806.pdf Mittal_columbia_0054D_17806.pdf application/pdf 14.8 MB Download File

More About This Work

Academic Units
Thesis Advisors
Van Nieuwerburgh, Stijn G.
Ph.D., Columbia University
Published Here
April 19, 2023