Research Conversation with Finance PhD Alum Sungjoung Kwon

Sungjoung Kwon

Enter the Research Conversation with Sungjoung Kwon

Why do mutual funds invest in private firms, and what are the consequences?

Uber, Airbnb, and Dropbox have two things in common: they are privately held startup companies valued above $1 billion, and they received investments from mutual funds. Mutual funds typically do not invest in private startups due to liquidity concerns or regulations. Our research documents a dramatic increase over the past twenty years in the number of mutual funds participating in private markets and in the dollar value of these private firm investments. We find that this is driven by both demand and supply for such capital. From the companies’ perspective, investments by mutual funds enable them to stay private longer, which enables them to achieve a higher level of development before going public. From the funds’ perspectives, these investments have provided returns that are both higher than and virtually uncorrelated with returns on their public market investments.

The decline in the number of IPOs and the decrease in the number of publicly traded listed firms received a lot of attention from academic researchers and regulators. Our finding that increased mutual fund capital is flowing to private firms is intriguing when compared to these trends. Most importantly, now you can invest in private startups through mutual funds!

PhD Alumni


PhD Alumni

Area of Research

Private firms and venture capital

Area of Research

PhD Alumni


Seoul, South Korea

Fast Fact

I enjoy cooking and playing arcade games.

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