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The Risk Profile of Private Equity

Tom Weidig


Pierre-Yves Mathonet

European Investment Fund

January 2004

Private equity is a risky asset, but private equity investments not necessarily so. We look at the risk profile of each type of investment vehicle, and find clear differences. For example in venture capital, the probability of a total loss of capital invested is around 30% for direct investments, and close to zero for funds and funds-of-funds. The probability of a loss for a fund is around 30%, but small for a fund-of-funds. This shows that diversification effects are very important, and need to be taken into account to judge risk. Due to legal or statutory constraints, investors often use less risky vehicles like funds or funds-of-funds.

Number of Pages in PDF File: 33

Keywords: Private equity, venture capital, risk, Basel

JEL Classification: G24

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Date posted: February 7, 2004  

Suggested Citation

Weidig, Tom and Mathonet, Pierre-Yves, The Risk Profile of Private Equity (January 2004). Available at SSRN: https://ssrn.com/abstract=495482 or http://dx.doi.org/10.2139/ssrn.495482

Contact Information

Tom Weidig (Contact Author)
QuantExperts ( email )
9, rue Donven
Esch-Alzette, 4084
Pierre-Yves Mathonet
European Investment Fund ( email )
43, avenue J.F. Kennedy
Luxembourg City, L-2968
+352 42 66 88 343 (Phone)
+352 42 66 88 410 (Fax)
HOME PAGE: http://www.eif.org
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