TY - JOUR T1 - Private Equity Asset Allocation: <em>How to Recommit?</em> JF - The Journal of Private Equity SP - 9 LP - 22 DO - 10.3905/jpe.2015.18.2.009 VL - 18 IS - 2 AU - Adrian Oberli Y1 - 2015/02/28 UR - https://pm-research.com/content/18/2/9.abstract N2 - For institutional investors in private equity, a recommitment strategy to achieve a desired asset allocation is at least as important as the decision about the asset allocation itself. Because cash flows (both capital drawdowns and distributions) for the asset class are highly unpredictable up front, achieving the desired allocation in a portfolio context represents a multiperiod dynamic optimization problem. This article’s approach determines new commitments to private equity funds based on distributions, the amount needed to adjust asset class weights back to the desired portfolio asset allocation (rebalancing amount), as well as the current investment degree of the portfolio. Annually recommitting distributions and the rebalancing amount—both weighted by the inverse of the current period investment degree—optimizes institutional investors’ private equity asset allocation.TOPICS: Private equity, equity portfolio management, performance measurement, quantitative methods ER -