Accessing Private Markets: What Does It Cost?

Wayne Lim

Financial Analysts Journal, 2024, vol. 80, issue 4, 27-52

Abstract: This paper provides the first empirical analysis of the costs of financial intermediation across private markets and a framework to estimate ex-post costs using observed fund terms. I access a proprietary dataset, develop a novel model, and estimate that it costs investors $0.05 to $0.26 per dollar committed over funds’ lifetimes. The corresponding fee drag on gross-to-net total value to paid-in capital is 0.1x to 0.7x and 5% to 8% in annualized terms. The results demonstrate cost economies of scale in which larger funds cost less in management fees. Finally, the fraction of costs attributable to non-performance fees is 53% to 75%.

Date: 2024
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DOI: 10.1080/0015198X.2024.2397335

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