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

Robert S. Harris, Tim Jenkinson, Steven N. Kaplan and Ruediger Stucke

Journal of Financial Economics, 2018, vol. 129, issue 2, 287-305

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.

Keywords: Private equity; Fund of funds; Financial Intermediation (search for similar items in EconPapers)
JEL-codes: G20 G23 (search for similar items in EconPapers)
Date: 2018
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