Limited Partner Investments in Private Funds: Committee Decision-Making and Realized Performance

Abstract

Using investment committee meeting transcripts, we identify key factors in Israeli pension funds’ decisions to invest as limited partners in private equity and other private funds. We f ind that the time allocated to fund evaluation, and the topics discussed, are determined by the informational challenges the pension funds face. Using cash flow data, we find that the return on investments in foreign funds is lower than the estimates in the extant literature, and also lower than the return on investments in local funds, reflecting limited access to top US funds and the use of soft information in selecting local funds.