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Private Equity Benchmarks and Portfolio Optimization

Research output: Contribution to journalJournal article

Published

Journal publication date09/2013
JournalJournal of Banking and Finance
Journal number9
Volume37
Number of pages14
Pages3515–3528
Original languageEnglish

Abstract

Portfolio optimization using private equity is typically based on one of three indices: listed private equity, transaction-based private equity, or appraisal value-based private equity indices. However, we show that none of these indices is fully suitable for portfolio optimization. We introduce here a new benchmark index for venture capital and buyouts, which is updated monthly, adjusted for autocorrelation (de-smoothing), and available contemporaneously. We illustrate how our benchmark enables superior quantitative portfolio optimization.