The Return to Pension Funds' Private Equity Investments

Download or read book The Return to Pension Funds' Private Equity Investments written by Kasper Meisner Nielsen and published by . This book was released on 2008 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new evidence on the private equity premium puzzle suggested by Moskowitz and Vissing-Joslash;rgensen (2002); Even professional investors like pension funds seem to get a poor risk-return tradeoff from investing directly in private equity. We examine whether high risk tolerance, pecuniary and nonpecuniary benefits, overoptimism or political preferences can explain why pension funds despite this invest in private equity. The evidence suggests that mispricing due to overoptimism and subsequent low capital gains can explain the gap in returns to private equity.