Investing in Private Equity – Capital Commitment Considerations
UBS Alternative Investments, September 6, 2011
7 Pages Posted: 3 Apr 2012 Last revised: 28 May 2013
Date Written: April 3, 2012
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
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