Does Fund Size Affect Private Equity Performance? Evidence from Donation Inflows to Private Universities

Abhishek Bhardwaj, Abhinav Gupta, Sabrina T. Howell and Kyle Zimmerschied

No 33596, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Do returns in private equity (PE) rise or fall with fund scale? This question is increasingly urgent amid larger funds and new focus on the retail market. Since better managers can raise larger funds, the causal effect is difficult to identify. We develop an instrument based on gifts to universities, which lead to more capital for managers with preexisting relationships. We show decreasing returns; for example, a 1% size increase reduces net IRR by 0.1 percentage points. Larger funds do larger deals, which perform worse. We find no change in risk, in part because additional deals are more levered.

JEL-codes: G11 G23 G24 (search for similar items in EconPapers)
Date: 2025-03
Note: AP CF PR
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