How Do Private Equity Fees Vary Across Public Pensions?

52 Pages Posted: 24 Feb 2020 Last revised: 3 Mar 2021

See all articles by Juliane Begenau

Juliane Begenau

Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Emil Siriwardane

Harvard Business School - Finance Unit

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2021

Abstract

We provide evidence that investment fees vary within private equity funds. Net-of-fee return clustering suggests that 70% of funds group investors into two fee-tiers that vary along both fixed and variable components. Managers of venture capital funds and those with high past performance are less likely to tier their investors. Some investors consistently earn higher net-of-fee returns relative to others within their funds. Investor size, experience, and past performance explain some but not all of this effect, suggesting that unobserved traits like negotiation skill or bargaining power materially impact the fees investors pay in private equity.

Keywords: Pension Funds, Private Equity, Fee Dispersion, Search and Negotiation Frictions

JEL Classification: G23, G24, G51

Suggested Citation

Begenau, Juliane and Siriwardane, Emil, How Do Private Equity Fees Vary Across Public Pensions? (March 1, 2021). Available at SSRN: https://ssrn.com/abstract=3526469 or http://dx.doi.org/10.2139/ssrn.3526469

Juliane Begenau (Contact Author)

Stanford University - Graduate School of Business ( email )

Stanford, CA 94305
United States
6507245661 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Emil Siriwardane

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

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