Asset Allocation with Private Equity

95 Pages Posted: 30 Jan 2022 Last revised: 19 Aug 2022

See all articles by Arthur G. Korteweg

Arthur G. Korteweg

University of Southern California - Marshall School of Business

Mark M. Westerfield

University of Washington

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2022


We survey the literature on the private equity partnership arrangement from the perspective of an outside investor (limited partner). We examine how the partnership arrangement fits into a broader portfolio of investments, and we consider the methods and difficulties in performance measurement, both at the fund level and at the asset class level. We follow with a discussion of performance persistence and the skill and pricing power of both general and limited partners. We continue by examining the limited partner's problem of managing commitments and investments over time while diversifying across funds in light of both idiosyncratic and systematic shocks. We close with a summary of recent work on optimal portfolio allocation to private equity. Throughout, we consider how empirical and theoretical work match the particular institutional details of private equity, and we identify 27 open questions to help guide private equity research forward.

Keywords: Asset Allocation, Private Equity, Buyout, Venture Capital, Review Article

JEL Classification: G23, G24, G11

Suggested Citation

Korteweg, Arthur G. and Westerfield, Mark M., Asset Allocation with Private Equity (August 1, 2022). Available at SSRN: or

Arthur G. Korteweg

University of Southern California - Marshall School of Business ( email )

3670 Trousdale Parkway
Los Angeles, CA 90089
United States


Mark M. Westerfield (Contact Author)

University of Washington ( email )

Box 353200
Seattle, WA 98195
United States


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