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Does Fund Size Affect Private Equity Performance? Evidence from Donation Inflows to Private Universities

Author

Listed:
  • Abhishek Bhardwaj
  • Abhinav Gupta
  • Sabrina T. Howell
  • Kyle Zimmerschied

Abstract

Do returns in private equity (PE) rise or fall with fund scale? This question is increasingly urgent amid larger funds and new focus on the retail market. Since better managers can raise larger funds, the causal effect is difficult to identify. We develop an instrument based on gifts to universities, which lead to more capital for managers with preexisting relationships. We show decreasing returns; for example, a 1% size increase reduces net IRR by 0.1 percentage points. Larger funds do larger deals, which perform worse. We find no change in risk, in part because additional deals are more levered.

Suggested Citation

  • Abhishek Bhardwaj & Abhinav Gupta & Sabrina T. Howell & Kyle Zimmerschied, 2025. "Does Fund Size Affect Private Equity Performance? Evidence from Donation Inflows to Private Universities," NBER Working Papers 33596, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33596
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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