Working Paper: NBER ID: w18793
Authors: Berk A. Sensoy; Yingdi Wang; Michael S. Weisbach
Abstract: We evaluate the performance of limited partners' (LPs) private equity investments over time. Using a sample of 14,380 investments by 1,852 LPs in 1,250 buyout and venture funds started between 1991 and 2006, we find that the superior performance of endowment investors in the 1991-1998 period, documented in prior literature, is mostly due to their greater access to the top-performing venture capital partnerships. In the subsequent 1999-2006 period, endowments no longer outperform, and neither have greater access to funds that are likely to restrict access nor make better investment selections than other types of institutional investors. We discuss how these results are consistent with the general maturing of the industry, as private equity has transitioned from a niche, poorly understood area to a ubiquitous part of institutional investors' portfolios.
Keywords: private equity; limited partners; investment performance; endowments; venture capital
JEL Codes: G11; G24; G30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| access to top funds (G23) | superior selection skills (C52) |
| LP access to funds (G23) | performance (D29) |
| endowments access to high-performing venture funds (G24) | superior performance (D29) |
| reinvestment decisions by endowments (G11) | better outcomes (I14) |
| performance landscape shift (P27) | endowments no longer outperform (D29) |
| historical performance advantage of endowments (D29) | access to top funds (G23) |