Portfolio optimization using private equity is typically based on one of three indices: listed private equity, transaction-based private equity, or appraisal value-based private equity indices. However, we show that none of these indices is fully suitable for portfolio optimization. We introduce here a new benchmark index for venture capital and buyouts, which is updated monthly, adjusted for autocorrelation (de-smoothing), and available contemporaneously. We illustrate how our benchmark enables superior quantitative portfolio optimization.
- risk modelling
- private equity
- venture capital
Cumming, D., Hass, L. H., & Schweizer, D. (2013). Private equity benchmarks and portfolio optimization. Journal of Banking and Finance, 37(9), 3515–3528. https://doi.org/10.1016/j.jbankfin.2013.04.010