Financial Intermediation in Private Equity: How Well Do Funds of Funds Perform?
55 Pages
Posted: 20 Jun 2015
Last revised: 13 May 2017
University of Virginia - Darden School of Business
University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
University of Oxford - Said Business School
There are 2 versions of this paper
Date Written: May 11, 2017
Abstract
This paper focuses on funds of funds (FOFs) as a form of financial intermediation in private equity (both buyout and venture capital). After accounting for fees, FOFs provide returns equal to or above public market indices for both buyout and venture capital. While FOFs focusing on buyouts outperform public markets, they underperform direct fund investment strategies in buyout. In contrast, the average performance of FOFs in venture capital is on a par with results from direct venture fund investing. This suggests that FOFs in venture capital (but not in buyouts) are able to identify and access superior performing funds.
Keywords: private equity, fund of funds, financial intermediation, venture capital
JEL Classification: G20, G23
Suggested Citation:
Suggested Citation
Harris, Robert S. and Jenkinson, Tim and Kaplan, Steven N. and Stucke, Rüdiger, Financial Intermediation in Private Equity: How Well Do Funds of Funds Perform? (May 11, 2017). Darden Business School Working Paper No. 2620582. Available at SSRN: https://ssrn.com/abstract=2620582 or http://dx.doi.org/10.2139/ssrn.2620582
