Asset Allocation With Private Equity

The comprehensive guide to private market asset allocation Asset Allocation and Private Markets provides institutional investors, such as pension funds, insurance groups and family offices, with a single-volume authoritative resource on including private markets in strategic asset allocation. Written by four academic and practitioner specialists, this book provides the background knowledge investors need, coupled with practical advice from experts in the field. The discussion focuses on private equity, private debt and private real assets, and their correlation with other asset classes to establish optimized investment portfolios. Armed with the grounded and critical perspectives provided in this book, investors can tailor their portfolio and effectively allocate assets to traditional and private markets in their best interest. In-depth discussion of return, risks, liquidity and other factors of asset allocation takes a more practical turn with guidance on allocation construction and capital deployment, the “endowment model,” and hedging — or lack thereof. Unique in the depth and breadth of information on this increasingly attractive asset class, this book is an invaluable resource for investors seeking new strategies. Discover alternative solutions to traditional asset allocation strategies Consider attractive returns of private markets Delve into private equity, private debt and private real assets Gain expert perspectives on correlation, risk, liquidity, and portfolio construction Private markets represent a substantial proportion of global wealth. Amidst disappointing returns from stocks and bonds, investors are increasingly looking to revitalise traditional asset allocation strategies by weighting private market structures more heavily in their portfolios. Pension fund and other long-term asset managers need deeper information than is typically provided in tangential reference in broader asset allocation literature; Asset Allocation and Private Markets fills the gap, with comprehensive information and practical guidance.

Asset Allocation with Private Equity addresses the central question "What is the optimal portfolio allocation to private equity?" The authors have two goals. The first is to survey the literature on the private equity partnership arrangement from an investor's perspective. The second is to articulate a list of open questions in the literature. The monograph is organized to lead from a description of theoretical and empirical work toward open questions. To that end, a substantial number of recent and unpublished working papers are included in the monograph. It proceeds as follows: Section 2 contains institutional details regarding PE firms, funds, and investors. For some readers this will be a review, but it is included because the institutional details are required to understand the decision rights that the LP grants the GP and how those decisions are usually executed. There is a discussion of the GP's incentives, which pervades the discussion of selected data and pricing power later in the monograph. To understand why the institutional details of PE matter for LPs, one has to understand the uses and limitations of the benchmark portfolio choice model. To this end, Section 3 reviews a standard portfolio choice model and shows how the characteristics of PE violate the model's core assumptions. Section 4 describes the methods and problems with measuring performance in PE. Section 5 shifts the focus from PE investments to PE investors and examines the returns and pricing power of LPs. Section 6 focuses on LPs' diversification problem and their liquidity management problem, including the role of the secondary market. The authors close with a summary of some recent work in optimal portfolio allocation to PE.

Asset Allocation with Private Equity addresses the central question "What is the optimal portfolio allocation to private equity?" The authors have two goals. The first is to survey the literature on the private equity partnership arrangement from an investor's perspective. The second is to articulate a list of open questions in the literature.The monograph is organized to lead from a description of theoretical and empirical work toward open questions. To that end, a substantial number of recent and unpublished working papers are included in the monograph. It proceeds as follows: Section 2 contains institutional details regarding PE firms, funds, and investors. For some readers this will be a review, but it is included because the institutional details are required to understand the decision rights that the LP grants the GP and how those decisions are usually executed. There is a discussion of the GP's incentives, which pervades the discussion of selected data and pricing power later in the monograph. To understand why the institutional details of PE matter for LPs, one has to understand the uses and limitations of the benchmark portfolio choice model. To this end, Section 3 reviews a standard portfolio choice model and shows how the characteristics of PE violate the model's core assumptions. Section 4 describes the methods and problems with measuring performance in PE. Section 5 shifts the focus from PE investments to PE investors and examines the returns and pricing power of LPs. Section 6 focuses on LPs' diversification problem and their liquidity management problem, including the role of the secondary market. The authors close with a summary of some recent work in optimal portfolio allocation to PE.

How can private equity investors exploit investment opportunities in foreign markets? Peter Cornelius uses a proprietary database to investigate and describe private equity markets worldwide, revealing their levels of integration, their risks, and the ways that investors can mitigate those risks. In three major sections that concentrate on the risk and return profile of private equity, the growth dynamics of discrete markets and geographies, and opportunities for private equity investments, he offers hard-to-find analyses that fill knowledge gaps about foreign markets. Observing that despite the progressive dismantling of barriers investors are still home-biased, he demonstrates that a methodical approach to understanding foreign private equity markets can take advantage of the macroeconomic and structural factors that drive supply and demand dynamics in individual markets. Foreword by Josh Lerner Teaches readers how to investigate and analyze foreign private equity markets Forecasts private equity investment opportunities via macroeconomic and structural factors in individual markets Draws on data from a proprietary database covering 250 buyout and VC funds and 7,000 portfolio companies.

Discover a masterful exploration of the fallacies and challenges of asset allocation In Asset Allocation: From Theory to Practice and Beyond—the newly and substantially revised Second Edition of A Practitioner’s Guide to Asset Allocation—accomplished finance professionals William Kinlaw, Mark P. Kritzman, and David Turkington deliver a robust and insightful exploration of the core tenets of asset allocation. Drawing on their experience working with hundreds of the world’s largest and most sophisticated investors, the authors review foundational concepts, debunk fallacies, and address cutting-edge themes like factor investing and scenario analysis. The new edition also includes references to related topics at the end of each chapter and a summary of key takeaways to help readers rapidly locate material of interest. The book also incorporates discussions of: The characteristics that define an asset class, including stability, investability, and similarity The fundamentals of asset allocation, including definitions of expected return, portfolio risk, and diversification Advanced topics like factor investing, asymmetric diversification, fat tails, long-term investing, and enhanced scenario analysis as well as tools to address challenges such as liquidity, rebalancing, constraints, and within-horizon risk. Perfect for client-facing practitioners as well as scholars who seek to understand practical techniques, Asset Allocation: From Theory to Practice and Beyond is a must-read resource from an author team of distinguished finance experts and a forward by Nobel prize winner Harry Markowitz.

Guy Fraser-Sampson draws upon twenty years' private equity experience to provide a practical guide to mastering the intricacies of this highly specialist asset class. Aimed equally at investors, professionals and business school students, it starts with such fundamental questions as "what is private equity?" and progresses to detailed analysis of venture and buyout returns. It also unveils a totally new concept which looks set to revolutionise thinking in the industry: Total Return investing. Often unfairly reviled, and frequently misunderstood, private equity differs from all other asset classes in various important respects, not least in the nature and timing of its returns, which require a whole new approach for those reared on more traditional investments such as bonds and shares. This book shows how a good grasp of the basic structure of private equity vehicles and returns (including the dreaded J-curve) can lead to full understanding of the techniques needed to measure and analyse performance. Key points include: A glossary of private equity terms Venture funds and transactions Buyout funds and transactions Understanding private equity returns Analysis of historic returns How to plan a fund investment programme How to conduct effective due diligence Total Return investing

The Asset Allocation Workbook offers a range of practical information and exercises that reinforce the key concepts explored in Portfolio Management in Practice, Volume 2: Asset Allocation. Part of the reputable CFA Institute Investment Series, the workbook is designed to further students’ and professionals’ hands-on experience with a variety of learning outcomes, summary overview sections, and challenging problems and solutions. The workbook provides the necessary tools and latest information to help learners advance their skills in this critical facet of portfolio management. Aligning chapter-by-chapter with the main text so readers can easily pair exercises with the appropriate content, this workbook covers: Setting capital market expectations to support the asset allocation process Principles and processes in the asset allocation process, including handling ESG-integration and client-specific constraints Allocation beyond the traditional asset classes to include allocation to alternative investments The role of exchange-traded funds can play in implementing investment strategies The Asset Allocation Workbook has been compiled by experienced CFA members to give learners world-class examples based on scenarios faced by finance professionals every day. For practice on additional aspects of portfolio management, explore Volume 1: Investment Management, Volume 3: Equity Portfolio Management, and their accompanying workbooks to complete the Portfolio Management in Practice series.

The following chapter comes from Mastering the Art of Asset Allocation, which focuses on the knowledge and nuances that will help you achieve asset allocation success. Asset allocation authority David Darst builds upon his bestselling The Art of Asset Allocation to explore every aspect of asset allocation from foundations through correlations, providing you with detailed techniques for understanding and implementing asset allocation in any portfolio.