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Investing outside the box: Evidence from alternative vehicles in private equity

Author

Listed:
  • Lerner, Josh
  • Mao, Jason
  • Schoar, Antoinette
  • Zhang, Nan R.

Abstract

Using previously unexplored custodial data, we examine alternative investment vehicles (AVs) in private equity (PE) funds over the last four decades. By 2017, AVs reached 40% of all PE commitments. Average AV performance matches the PE market, but underperforms the main funds of the partnerships sponsoring the AVs. Limited partners (LPs) with better past performance invest in AVs with better average performance, even after conditioning on the general partners’ (GPs’) past records. This result is largely driven by preferential access of top LPs to top AVs. Returns in PE increasingly depend on the match between GPs and LPs and both parties’ outside options.

Suggested Citation

  • Lerner, Josh & Mao, Jason & Schoar, Antoinette & Zhang, Nan R., 2022. "Investing outside the box: Evidence from alternative vehicles in private equity," Journal of Financial Economics, Elsevier, vol. 143(1), pages 359-380.
    • Handle: RePEc:eee:jfinec:v:143:y:2022:i:1:p:359-380
    DOI: 10.1016/j.jfineco.2021.05.034
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    References listed on IDEAS

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    1. Sensoy, Berk A. & Wang, Yingdi & Weisbach, Michael S., 2014. "Limited partner performance and the maturing of the private equity industry," Journal of Financial Economics, Elsevier, vol. 112(3), pages 320-343.
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    More about this item

    Keywords

    Private equity; Venture capital; Fundraising; Alternative vehicles;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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