A Recommitment Strategy for Long Term Private Equity Fund Investors
2007-12-24
Research Paper
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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
Classifications using
Journal of Economic Literature (JEL) Classification System
- G3 : Corporate Finance and Governance
- G12 : Asset Pricing
- M : Business Administration and Business Economics; Marketing; Accounting
Automatically Extracted Terms
- investment
- investment degree
- equity
- portfolio
- degree
- strategy
- commitment
- capital
- equity funds
- distribution
- recommitment
- overcommitment
- investor
- target
- recommitment strategy
- figure
- venture
- strategy iii
- quarter
- result
