Access versus Selection: What Drives Limited Partners’ Private Equity Returns?

An institutional investor’s private equity fund investment returns are determined by his/her access to and skills in selecting the best funds, but little is known about the extent of these two effects. Using a large sample of European pension funds’ private equity fund investments, we observed that limited partners are unable to select better funds for reinvestment compared to funds in which they choose not to reinvest. Our results imply that selection skills alone may not be an adequate explanation of the systematic differences between different limited partners’ returns, as suggested by previous research. * Corresponding author: Otso Manninen. Address: Aalto University, PO Box 15500, 00076 Aalto, Finland Tel.: +358-40-4102642 Fax: +358-9-47023095 E-mail address: [email protected]