Investment Consultants in Private Equity

Abstract

We examine the role of consultants in the private equity investment choices of institutional asset owners. Consultants differ significantly in size, specialization, and number of PE managers on their lists. Asset owners using the same search consultant make similar investments. Asset owners advised by consultants that rely on a narrower list of PE managers perform better. Among asset owners that share a consultant, those with the largest PE mandates (top customers) end up with better-performing investments. Absolute mandate size, unlike mandate size relative to other mandates served by the same consultant, does not seem to be significantly related to asset owner performance. Neither does consultant size, PE specialization, and involvement in fund management.

Keywords: Investment consultants, Private equity, Institutional investors

JEL Classification: G11, G20, G23