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Private equity benchmarks and portfolio optimization

Author

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  • Cumming, Douglas
  • Helge Haß, Lars
  • Schweizer, Denis

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.

Suggested Citation

  • Cumming, Douglas & Helge Haß, Lars & Schweizer, Denis, 2013. "Private equity benchmarks and portfolio optimization," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3515-3528.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:9:p:3515-3528
    DOI: 10.1016/j.jbankfin.2013.04.010
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    6. Kallenos, Theodosis L. & Nishiotis, George P., 2023. "Market-based private equity returns," Journal of Banking & Finance, Elsevier, vol. 157(C).
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    8. Chen, Linda H. & Dyl, Edward A. & Jiang, George J. & Juneja, Januj A., 2015. "Risk, illiquidity or marketability: What matters for the discounts on private equity placements?," Journal of Banking & Finance, Elsevier, vol. 57(C), pages 41-50.
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    More about this item

    Keywords

    Benchmark; Risk modeling; Private equity; Venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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