Investing in Private Equity – Capital Commitment Considerations
Active Allocator Inc.; Massachusetts Institute of Technology (MIT); Harvard University
April 3, 2012
UBS Alternative Investments, September 6, 2011
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.
Number of Pages in PDF File: 7
Keywords: private equity, commitment, J Curve, drawdown
Date posted: April 3, 2012 ; Last revised: May 28, 2013