Picking Partners: Manager Selection in Private Equity

We study the selection of private equity managers (GPs) for over 100,000 capital commitments between 1990 and 2019 by global institutional investors (LPs) choosing from a plausible contemporaneous opportunity set. In addition to chasing GPs with high prior performance, LPs have large propensities to select first-time or young GPs without a performance history. LPs also have tendencies to follow their peers’ investment decisions, to reinvest with the same GP, and to invest with GPs domiciled in the same state/country. These selection criteria, however, do not provide information material for future performance, and in the case of first-time GPs are associated with lower future performance.