PT - JOURNAL ARTICLE AU - Alexander Rudin AU - Jason Mao AU - Nan R. Zhang AU - Anne-Marie Fink TI - Private Equity Program Breadth and Strategic Asset Allocation AID - 10.3905/jpe.2019.22.2.019 DP - 2019 Feb 28 TA - The Journal of Private Equity PG - 19--26 VI - 22 IP - 2 4099 - https://pm-research.com/content/22/2/19.short 4100 - https://pm-research.com/content/22/2/19.full AB - It is quite often the case that investors form views on private equity program return and cash flow profiles by analyzing broad-based swaths of the private equity industry, while side-stepping idiosyncratic risks associated with narrower, realistic baskets of private equity pools. This article remedies this by performing an empirical analysis of private equity historical performance while accounting for program diversification. Comparing a private equity program to peer group averages is somewhat unfair, as such methodology favors larger programs, arguably without merit. The authors explain a way to correct for this bias. Finally, the authors present a probabilistic strategic asset allocation framework for private equity programs that help make informed trade-offs between breadth, strategy mix, and associated costs.TOPICS: Private equity, statistical methods, performance measurement, portfolio construction