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Journal of Financial Economics Vol. 129 No. 2 2018

Financial intermediation in private equity: How well do funds of funds perform?

Robert S. Harris1; Tim Jenkinson2; Steven N. Kaplan3; Ruediger Stucke4

1 University of Virginia · 2 University of Oxford · 3 University of Chicago · 4 Warburg Pincus, LLC ,USA

open access

Abstract

This paper focuses on funds of funds (FOFs) as a form of financial intermediation in private equity (both buyout and venture capital). After accounting for fees, FOFs provide returns equal to or above public market indices for both buyout and venture capital. While FOFs focusing on buyouts outperform public markets, they underperform direct fund investment strategies in buyout. In contrast, the average performance of FOFs in venture capital is on a par with results from direct venture fund investing. This suggests that FOFs in venture capital (but not in buyouts) are able to identify and access superior performing funds.

DOI
10.1016/j.jfineco.2018.04.013
Volume
129
Issue
2
Pages
287-305
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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