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
