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Investing in Private Equity – Capital Commitment Considerations

UBS Alternative Investments, September 6, 2011

7 Pages Posted: 3 Apr 2012 Last revised: 28 May 2013

Sameer Jain

Active Allocator Inc.; Massachusetts Institute of Technology (MIT); Harvard University

Date Written: April 3, 2012

Abstract

This paper explores capital commitment and cash-flow management issues in private equity fund investing. It provides a theoretical framework to structure private equity capital commitment issues in a formal manner, and defines variables, inter-relationships, and boundaries in such a way that the problem can be worked upon. The paper’s findings suggest that achieving a targeted level of allocation to private equity is a function of the pace of capital deployment as well as dependent upon the desired amount of targeted exposure. It is also dependent on the spread of realized returns in private equity versus other asset classes, as well as on timing and realization periods for capital already invested.

Keywords: private equity, commitment, J Curve, drawdown

Suggested Citation

Jain, Sameer, Investing in Private Equity – Capital Commitment Considerations (April 3, 2012). UBS Alternative Investments, September 6, 2011. Available at SSRN: https://ssrn.com/abstract=2034010

Sameer Jain (Contact Author)

Active Allocator Inc. ( email )

NJ 07310
United States

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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