Publications
Publications
- January 2022
- Journal of Financial Economics
Investing Outside the Box: Evidence from Alternative Vehicles in Private Equity
By: Josh Lerner, Jason Mao, Antoinette Schoar and Nan R. Zhang
Abstract
This paper uses previously unexplored custodial data to examine the use of alternative investment vehicles in private equity (PE) over four decades. We document a steep increase in the capital directed to alternative vehicles, with these vehicles approaching a 40% share of all PE commitments in 2017. The average performance of alternative vehicles matches that of the overall PE market, but the performance lagged that of the general partners’ (GPs) corresponding main funds. The best performance in alternative vehicles was by endowments, private pensions, and insurers. Finally, limited partners, (LPs) with better past performance invested in alternative vehicles with better performance, even after conditioning on the GPs’ past records. The results suggest that returns in private equity increasingly depend on the match between GPs and LPs and both parties’ outside options.
Keywords
Citation
Lerner, Josh, Jason Mao, Antoinette Schoar, and Nan R. Zhang. "Investing Outside the Box: Evidence from Alternative Vehicles in Private Equity." Journal of Financial Economics 143, no. 1 (January 2022): 359–380. (Won the 2022 Doriot Award for the Best Private Equity Research Paper.)