A Recommitment Strategy for Long Term Private Equity Fund Investors
This paper develops a reinvestment strategy for private equity which aims to keep its portfolio weight equal to a desired strategic allocation, while taking into account the illiquid nature of private equity. Historical simulations (1980-2005) show that our dynamic strategy is capable of maintaining a stable investment level that is close to the target. This does not only hold for unrestricted portfolios, but also for investments limited to buyout or venture capital, a specific region, or management experience. This finding is of great importance for investors, because private equity funds have a finite lifetime and uncertain cash flows.
|Keywords||overcommitment, private equity funds, recommitment strategy, strategic asset allocation|
|Publisher||Erasmus Research Institute of Management (ERIM)|
de Zwart, G.J., Frieser, B., & van Dijk, D.J.C.. (2007). A Recommitment Strategy for Long Term Private Equity Fund Investors (No. ERS-2007-097-F&A). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management (ERIM). Retrieved from http://hdl.handle.net/1765/10892