The Determinants of Pension Funds’ Allocation to Private Equity

30 Pages Posted: 4 Dec 2013

See all articles by Antonia López-Villavicencio

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Sandra Rigot

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Date Written: November 30, 2013

Abstract

This paper investigates the main determinants of pension funds investment in private equity funds, and particularly in venture capital and leverage buyouts in the US and Canada over the 1996-2011 period. Our results, based on a Tobit model, show some important differences between pension funds allocating to private equity and more traditional assets (i.e. equity). The first ones are bigger, mainly diversified private funds. They do not consider the age of their members when deciding this type of allocation and they present a higher discount rate. Furthermore, they specially take into account their private equity returns in comparison to management costs. We also show that pension funds investing in private equity do not distinguish between venture capital and leverage buyouts.

Keywords: pension funds, private equity, asset allocation, long term investors

JEL Classification: G23

Suggested Citation

López-Villavicencio, Antonia and Rigot, Sandra, The Determinants of Pension Funds’ Allocation to Private Equity (November 30, 2013). Available at SSRN: https://ssrn.com/abstract=2363356 or http://dx.doi.org/10.2139/ssrn.2363356

Antonia López-Villavicencio (Contact Author)

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Sandra Rigot

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

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