Investing Outside the Box: Evidence from Alternative Vehicles in Private Equity
56 Pages Posted: 13 Aug 2018 Last revised: 7 May 2020
Date Written: May 5, 2020
Using previously unexplored custodial data, we examine the use of alternative investment vehicles
(AVs) in private equity over four decades. By 2017, AVs reached 40% of all PE commitments.
Average AV performance matches the PE market, but underperforms the main funds of the
partnerships sponsoring AVs. LPs with better past performance invest in AVs with better average
performance, even after conditioning on the GPs’ past records. This result is largely driven by
preferential access of top LPs to top AVs. As a result, returns in PE increasingly depend on the
match between GPs and LPs and both parties’ outside options.
Keywords: Co-investment, limited partner, fund
JEL Classification: G23, G24
Suggested Citation: Suggested Citation