Home Bias and Local Outperformance of Limited Partner Investments: Evidence from Private Equity Fund Manager Selection

46 Pages Posted: 23 Mar 2021 Last revised: 11 May 2021

See all articles by Stefan Morkoetter

Stefan Morkoetter

University of St. Gallen - School of Finance; University of St.Gallen / St.Gallen Institute of Management in Asia

Tobias Schori

University of St. Gallen

Date Written: March 23, 2021

Abstract

Based on a sample of 114,098 investments committed by 12,258 limited partners into 20,473 private equity funds, we study an international home bias in fund manager selection in private equity. We find that limited partners overweigh their investments with fund managers domiciled in the same geographical region by 45% on average. The home bias in local fund manager selection holds across investor types, fund characteristics as well as market regions. Investments committed with locally domiciled fund managers are not only being overweighed, but also perform better than investments with fund managers domiciled in foreign market regions. We argue that limited partners benefit from information advantages and better fund access when selecting private equity funds within their home market region.

Keywords: home bias, private equity, limited partner performance

JEL Classification: G11, G23

Suggested Citation

Morkoetter, Stefan and Schori, Tobias, Home Bias and Local Outperformance of Limited Partner Investments: Evidence from Private Equity Fund Manager Selection (March 23, 2021). Available at SSRN: https://ssrn.com/abstract=3810468 or http://dx.doi.org/10.2139/ssrn.3810468

Stefan Morkoetter (Contact Author)

University of St. Gallen - School of Finance ( email )

111 Amoy Street
Singapore, 069931
Singapore

University of St.Gallen / St.Gallen Institute of Management in Asia ( email )

111 Amoy Street
Singapore, 069931
Singapore

Tobias Schori

University of St. Gallen ( email )

Bodanstrasse 8
SIAW-HSG
St.Gallen, 9000
Switzerland

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