There Is Something Special about Large Investors: Evidence from a Survey of Private Equity Limited Partners

We show that investors with more dollar amount allocated to private equity conduct more thorough due diligence and have different investment criteria. The fraction allocated to private equity, the organization?s total asset under management, and other investor characteristics that broadly capture prestige, experience, and long-term relationship do not explain these differences in effort and beliefs. We also document several novel facts that contribute to opening the black box of the investment process in alternative asset classes. An implication of our results is that the emergence of gigantic institutional investors may come with a radical change in the beliefs and actions of the marginal investor.