Investor Scale and Performance in Private Equity Investments

Author: I. J. Alexander Dyck, Lukasz Pomorski

We document that defined benefit pension plans with significant holdings in private equity (PE) earn substantially greater returns than plans with small holdings in both the 1990s and the 2000s. A one standard deviation increase in PE holdings is associated with 4% greater returns per year. Up to one third of this outperformance comes from lower costs that we link to economizing on costly intermediation by avoiding fund-of-funds and investing directly. The bulk of the outperformance comes from superior gross returns only partially explained by access and experience. We conjecture that larger PE investors have superior due diligence and ability to bridge information asymmetries in PE.



Dyck, I.J. Alexander and Pomorski, Lukasz, Investor Scale and Performance in Private Equity Investments (November 1, 2014). Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2192619 or http://dx.doi.org/10.2139/ssrn.2192619
Source: https://papers.ssrn.com/sol3/papers.cfm?abstr...

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