How Do Private Equity Fees Vary Across Public Pensions?

65 Pages Posted: 24 Feb 2020 Last revised: 15 Jul 2020

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

Date Written: June 30, 2020

Abstract

We document large variation in net-of-fee performance across public pension funds investing in the same private equity fund. In aggregate, these differences imply that the pensions in our sample would have earned $44 billion more – equivalent to $8.50 more per $100 invested – had they each received the best observed terms in their respective funds. There are also large pension-effects in the sense that some pensions systematically pay more fees than others when investing in the same fund. With better terms, the 95th percentile pension would have earned $14.91 more per $100 invested compared to $1.12 for the 5th percentile pension. Pension characteristics such as commitment size, overall size, relationships with fund managers, and governance account for a modest amount of the pension effects, meaning similar pensions consistently pay different fees.

Keywords: Pension Funds, Private Equity Fees, Price Dispersion, Public Finance

JEL Classification: G23, G24, G51

Suggested Citation

Begenau, Juliane and Siriwardane, Emil, How Do Private Equity Fees Vary Across Public Pensions? (June 30, 2020). 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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