In the paper, “An Unfair Advantage”? Combining Banking with Private Equity Investing, which was recently made publicly available on SSRN, we explore the phenomenon and economics of private equity investment by bank-affiliated groups. This paper is motivated by recent regulatory efforts to limit the ability of banks to undertake proprietary investing and trading activities. Despite the controversy and policy debate that the proposed Volcker rule has engendered, we know remarkably little about how banks have fared as investors. Does the combination of banking and private equity investing endow banks with superior information that allows them to identify good prospects and garner superior returns? Or does the combination bestow banks with an unfair ability to expand their balance sheets, capturing benefits within the bank at the expense of the overall market and ultimately the tax payers? We focus here on understanding the experience of bank-affiliated funds with private equity to shed light on these questions.

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