LISTED PRIVATE EQUITY IN A PORTFOLIO CONTEXT

Philipp Aigner, Georg Beyschlag, Tim Friederich, Markus Kalepky and Rudi Zagst
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Philipp Aigner: Max-Planck-Str. 1, 81675 München, Germany
Georg Beyschlag: Brixener Str. 17, 86720 Nördlingen, Germany
Tim Friederich: risklab GmbH, Seidlstraße 24-24a, 80335 München, Germany
Markus Kalepky: Ringgasse 24, 55218 Ingelheim, Germany
Rudi Zagst: HVB-Stiftungsinstitut für Finanzmathematik, Technische UniversitÄt MÜnchen, Boltzmannstr. 3, 85747 München, Germany

Chapter 2 in Alternative Investments and Strategies, 2010, pp 21-49 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThis chapter first provides a comprehensive overview of private equity by categorizing the private equity investments into financing stages, divestment strategies, and types of financing. Different ways of investing in the asset class “private equity” are characterized, ranging from direct investments, which are hard to access, to listed private equity (LPE) investments, which provide a liquid means for investors to consider private equity in their portfolios. A Markov–Switching model is presented, which is able to capture the characteristics of the asset class LPE. By applying several risk measures and optimization frameworks, the question of the optimal fraction for an LPE investment in an investor's portfolio is scrutinized. Depending on the risk aversion of the investor, the optimal fraction of an LPE investment in this study ranges between 0% for a very risk averse investor, 7.5–11.8% for a moderately risky investor, and 16.9–27.9% for an investor willing to take higher risks.

Keywords: Alternative Investments; Portfolio Selection; Trading Strategy; Product Innovations; CPPI; Portfolio Optimization; Portfolio Insurance (search for similar items in EconPapers)
Date: 2010
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