PEARL: Private Equity Accessibility Reimagined with Liquidity

ArXiv ID: 2510.23183 “View on arXiv”

Authors: E. Benhamou, JJ. Ohana, B. Guez, E. Setrouk, T. Jacquot

Abstract

In this work, we introduce PEARL (Private Equity Accessibility Reimagined with Liquidity), an AI-powered framework designed to replicate and decode private equity funds using liquid, cost-effective assets. Relying on previous research methods such as Erik Stafford’s single stock selection (Stafford) and Thomson Reuters - Refinitiv’s sector approach (TR), our approach incorporates an additional asymmetry to capture the reduced volatility and better performance of private equity funds resulting from sale timing, leverage, and stock improvements through management changes. As a result, our model exhibits a strong correlation with well-established liquid benchmarks such as Stafford and TR, as well as listed private equity firms (Listed PE), while enhancing performance to better align with renowned quarterly private equity benchmarks like Cambridge Associates, Preqin, and Bloomberg Private Equity Fund indices. Empirical findings validate that our two-step approachdecoding liquid daily private equity proxies with a degree of negative return asymmetry outperforms the initial daily proxies and yields performance more consistent with quarterly private equity benchmarks.

Keywords:

Complexity vs Empirical Score

• Math Complexity: 7.5/10
• Empirical Rigor: 8.0/10
• Quadrant: Holy Grail
• Why: The paper employs advanced machine learning and graphical models for replication (high math), while its validation involves correlation with established benchmarks and backtesting against private equity indices (high empirical rigor).

  flowchart TD
    A["Research Goal: Develop AI-powered framework<br>to replicate private equity funds<br>with liquid, cost-effective assets"] --> B["Core Methodology: Two-step approach<br>incorporating negative return asymmetry"]
    B --> C["Inputs & Data<br>TR Refinitiv Sector Approach<br>Erik Stafford Single Stock Selection"]
    C --> D{"Computation: Decode Daily<br>Liquid Private Equity Proxies"}
    D --> E["Apply Asymmetry to capture<br>leverage, timing, & management effects"]
    E --> F["Generate Enhanced Daily<br>Private Equity Proxy"]
    F --> G["Key Outcomes & Findings"]
    G --> H["Correlation: Strong alignment<br>with liquid benchmarks (Stafford, TR, Listed PE)"]
    G --> I["Performance: Outperforms initial proxies<br>Aligns with quarterly PE benchmarks<br>(Cambridge, Preqin, Bloomberg)"]