Understanding and Evaluating Buyout Portfolio Risks

8 Pages Posted: 21 Jul 2010 Last revised: 22 Aug 2010

See all articles by Konstantin A. Danilov, CFA

Konstantin A. Danilov, CFA

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Analysis Group

Date Written: July 20, 2010


The purpose of the paper will be to understand and evaluate portfolio level risk from the perspective of an investor (LP) whose portfolio contains one or more buyout funds. For the purposes of this paper, risk will be defined as the increased probability of a loss of capital that would result in a return that is less than the median LBO return for a given year. It is the intent of the paper to acknowledge the limits of statistical analysis and focus on a logical measure of relative risk by creating a “risk spectrum” for each of what I believe to be the fundamental risk drivers within a fund. Further, I will try to establish a framework for monitoring risk on an ongoing basis, as it will likely change during the fund’s life.

Keywords: Private Equity, Buyout, Risk, alternative investments

Suggested Citation

Danilov, Konstantin A., Understanding and Evaluating Buyout Portfolio Risks (July 20, 2010). Available at SSRN: https://ssrn.com/abstract=1645946 or http://dx.doi.org/10.2139/ssrn.1645946

Konstantin A. Danilov (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

Analysis Group ( email )

111 Huntington Avenue, Tenth Floor
Boston, MA 02199
United States

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