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Notices
Bridge over ocean
1 May 2012 Financial Analysts Journal Volume 68, Issue 3

Private Equity Recommitment Strategies for Institutional Investors

Gerben de Zwart, Brian Frieser, and Dick van Dijk

Institutional investors must deal with irrevocable commitments, cash flow uncertainty, and illiquidity when making new commitments to maintain their portfolio exposure to private equity funds. This study develops a dynamic recommitment strategy to preserve the strategic allocation to private equity. For each period, the level of new commitments is determined by characteristics of the existing private equity portfolio, including received distributions, uncalled capital from old commitments, and the current allocation relative to its target level.

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