TY  - JOUR
AU  - Lerner,Josh
AU  - Schoar,Antoinette
AU  - Wong,Wan
TI  - Smart Institutions, Foolish Choices? The Limited Partner Performance Puzzle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11136
PY  - 2005
Y2  - February 2005
UR  - http://www.nber.org/papers/w11136
L1  - http://www.nber.org/papers/w11136.pdf
N1  - Author contact info:
Josh Lerner
Harvard Business School
Rock Center 214
Boston, MA 02163
Tel: 617/495-6065
Fax: 617/496-7357
E-Mail: jlerner@hbs.edu

Antoinette Schoar
MIT Sloan School of Management
100 Main Street, E62-638
Cambridge, MA  02142
Tel: 617/253-3763
Fax: 617/258-6855
E-Mail: aschoar@mit.edu
AB  - The returns that institutional investors realize from private equity investments differ dramatically across institutions.  Using detailed and hitherto unexplored records of fund investors and performance, we document large heterogeneity in the performance of different classes of limited partners.  In particular, endowments' annual returns are nearly 14% greater than average.  Funds selected by investment advisors and banks lag sharply.  These results are robust to controlling for the type and year of the investment, as well as to the use of different specifications.  Analyses of reinvestment decisions and young funds suggest that the results are not primarily due to endowments' greater access to established funds.  Finally, we examine the differences in the choice of intermediaries across various institutional investors and their relationship to success.  We find that LPs that have higher average IRRs also tend to invest in older funds and have a smaller fraction of GPs in their geographic area, and that the performance of university endowments is correlated with measures of the quality and loyalty of the student body.
ER  -