Private Portfolio Attribution Analysis
21 Pages Posted: 7 Jul 2020 Last revised: 20 Nov 2020
Date Written: November 13, 2020
There are many methods for conducting performance attribution with portfolios containing only liquid assets. Efforts to conduct similar types of attribution analyses for portfolios of private equity funds (and other illiquid investments) have been thwarted by a lack of periodic asset return data and a clear definition of what constitutes an appropriate market benchmark. We propose a method for decomposing private fund portfolio performance into effects from timing, strategy selection, geographic focus, sizing of fund allocation, and fund selection attributes. We test the method with a simulation study and derive approximate confidence intervals for assessing attribute selection skill using a large historical dataset of buyout and venture capital funds.
Keywords: Private Equity, Venture Capital, Attribution Analysis, Selection Skill
JEL Classification: G11
Suggested Citation: Suggested Citation