Optimal Allocation to Private Equity

Nicola Giommetti; Morten Sorensen

Optimal Allocation to Private Equity

Nicola Giommetti, Morten Sorensen

Institut for Finansiering

Dartmouth College

Publikation: Konferencebidrag › Konferenceabstrakt til konference › Forskning › peer review

Abstract

We study the portfolio problem of an investor (LP) that invests in stocks, bonds, and private equity (PE) funds. The LP repeatedly commits capital to PE funds. This capital is only gradually contributed and eventually distributed back to the LP, requiring the LP to hold a liquidity buffer for its uncalled commitments. Despite being riskier, PE investments are not monotonically declining in risk aversion. Instead, there are two qualitatively different investment strategies with intuitive heuristics. We introduce a secondary market for PE partnership interests to study optimal trading in this market and implications for the LP’s optimal investments.

Originalsprog	Engelsk
Publikationsdato	2023
Status	Udgivet - 2023
Begivenhed	ASSA 2023 Annual Meeting - Hilton Riverside, New Orleans, USA Varighed: 6 jan. 2023 → 8 jan. 2023 https://www.aeaweb.org/conference/2023

Konference

Konference	ASSA 2023 Annual Meeting
Lokation	Hilton Riverside
Land/Område	USA
By	New Orleans
Periode	06/01/2023 → 08/01/2023
Internetadresse	https://www.aeaweb.org/conference/2023

Adgang til dokumentet

https://www.aeaweb.org/conference/2023/program?q=eNpNjcEKwkAMRP8l5xX0IEJ_oBeP3iV0Aw007rKJSin77yaK0NvMm2RmAyVs0wzD5kqVy-O2VtpZGOAEPQGqlskNJDBq4mrkXCJCZuzo13JlYdN4xqfNpd0XVPsXvJjeEWUy5IXyl1wnaLW6Oh_jJOMa9HCJERaKud4_lyA0Bg%2C%2C#Licens: Ikke-specificeret

Handle.net

Persistent link

Citationsformater

Giommetti, N., & Sorensen, M. (2023). Optimal Allocation to Private Equity. Abstract fra ASSA 2023 Annual Meeting, New Orleans, Louisiana, USA. https://www.aeaweb.org/conference/2023/program?q=eNpNjcEKwkAMRP8l5xX0IEJ_oBeP3iV0Aw007rKJSin77yaK0NvMm2RmAyVs0wzD5kqVy-O2VtpZGOAEPQGqlskNJDBq4mrkXCJCZuzo13JlYdN4xqfNpd0XVPsXvJjeEWUy5IXyl1wnaLW6Oh_jJOMa9HCJERaKud4_lyA0Bg%2C%2C#

@conference{3e4da6d1f7c040418b3e541b73f00f66,

title = "Optimal Allocation to Private Equity",

abstract = "We study the portfolio problem of an investor (LP) that invests in stocks, bonds, and private equity (PE) funds. The LP repeatedly commits capital to PE funds. This capital is only gradually contributed and eventually distributed back to the LP, requiring the LP to hold a liquidity buffer for its uncalled commitments. Despite being riskier, PE investments are not monotonically declining in risk aversion. Instead, there are two qualitatively different investment strategies with intuitive heuristics. We introduce a secondary market for PE partnership interests to study optimal trading in this market and implications for the LP{\textquoteright}s optimal investments.",

author = "Nicola Giommetti and Morten Sorensen",

year = "2023",

language = "English",

note = "ASSA 2023 Annual Meeting ; Conference date: 06-01-2023 Through 08-01-2023",

url = "https://www.aeaweb.org/conference/2023",

}

Giommetti, N & Sorensen, M 2023, 'Optimal Allocation to Private Equity', ASSA 2023 Annual Meeting, New Orleans, USA, 06/01/2023 - 08/01/2023. <https://www.aeaweb.org/conference/2023/program?q=eNpNjcEKwkAMRP8l5xX0IEJ_oBeP3iV0Aw007rKJSin77yaK0NvMm2RmAyVs0wzD5kqVy-O2VtpZGOAEPQGqlskNJDBq4mrkXCJCZuzo13JlYdN4xqfNpd0XVPsXvJjeEWUy5IXyl1wnaLW6Oh_jJOMa9HCJERaKud4_lyA0Bg%2C%2C#>

TY - ABST

T1 - Optimal Allocation to Private Equity

AU - Giommetti, Nicola

AU - Sorensen, Morten

PY - 2023

Y1 - 2023

N2 - We study the portfolio problem of an investor (LP) that invests in stocks, bonds, and private equity (PE) funds. The LP repeatedly commits capital to PE funds. This capital is only gradually contributed and eventually distributed back to the LP, requiring the LP to hold a liquidity buffer for its uncalled commitments. Despite being riskier, PE investments are not monotonically declining in risk aversion. Instead, there are two qualitatively different investment strategies with intuitive heuristics. We introduce a secondary market for PE partnership interests to study optimal trading in this market and implications for the LP’s optimal investments.

AB - We study the portfolio problem of an investor (LP) that invests in stocks, bonds, and private equity (PE) funds. The LP repeatedly commits capital to PE funds. This capital is only gradually contributed and eventually distributed back to the LP, requiring the LP to hold a liquidity buffer for its uncalled commitments. Despite being riskier, PE investments are not monotonically declining in risk aversion. Instead, there are two qualitatively different investment strategies with intuitive heuristics. We introduce a secondary market for PE partnership interests to study optimal trading in this market and implications for the LP’s optimal investments.

M3 - Conference abstract for conference

T2 - ASSA 2023 Annual Meeting

Y2 - 6 January 2023 through 8 January 2023

ER -