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      How do Private Equity Fees Vary Across Public Pensions?
      Working Paper Summaries

      How do Private Equity Fees Vary Across Public Pensions?

      by Juliane Begenau and Emil Siriwardane
      As state and local defined-benefit pensions increasingly shift capital from traditional asset classes to private-market investment vehicles, this analysis shows that public pensions investing in the same private-market fund can experience very different returns.
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      Author Abstract

      We document large variation in net-of-fee performance across public pension funds investing in the same private equity fund. In aggregate, these differences imply that the pensions in our sample would have earned $45 billion more—equivalent to $8.50 more per $100 invested—had they each received the best observed terms in their respective funds. There are also large pension-effects in the sense that some pensions systematically pay more fees than others when investing in the same fund. With better terms, the 95th percentile pension would have earned $14.91 more per $100 invested compared to $1.12 for the 5th percentile pension. Pension characteristics such as commitment size, overall size, relationships with fund managers, and governance account for a modest amount of the pension effects, meaning similar pensions consistently pay different fees.

      Paper Information

      • Full Working Paper Text
      • Working Paper Publication Date: June 2020
      • HBS Working Paper Number: HBS Working Paper #20-073
      • Faculty Unit(s): Finance
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      Emil N. Siriwardane
      Emil N. Siriwardane
      Assistant Professor of Business Administration
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