What was the rationale for selecting the risk factors used in your asset pricing model?

Answer

Our potential risk factors are obtained from published academic research, a survey of GPs that we conducted in 2023 where we asked about their valuation approaches, and private market institutional characteristics that influence price formation in these markets. Additionally, we also include PECCS™ classes as factors as they group together assets that are systematically valued in similar manners.

With this potential list of factors, our final list of factors is arrived at by choosing those factors that can cross-sectionally explain the transaction prices in private markets in a statistically significant manner and in an economically meaningful way.