RT Journal Article SR Electronic T1 The Components of Private Equity Performance: Implications for Portfolio Choice JF The Journal of Alternative Investments FD Institutional Investor Journals SP 25 OP 38 DO 10.3905/jai.2015.18.2.025 VO 18 IS 2 A1 Will Kinlaw A1 Mark Kritzman A1 Jason Mao YR 2015 UL https://pm-research.com/content/18/2/25.abstract AB Kinlaw, Kritzman, and Mao use a proprietary database of private equity returns to measure the excess return of private equity over public equity and to partition this return into two components: an asset class alpha and compensation for illiquidity. Their evidence suggests that private equity managers, as a group, generate alpha by anticipating the relative performance of economic sectors. The authors assume that manager-specific alpha is fully diluted across a broad universe of private equity managers to interpret the balance of excess return as a premium for illiquidity. Their results suggest that investors can capture the asset class alpha of private equity by using liquid assets such as exchange-traded funds to match the sector weights of private equity investors. This decomposition of private equity performance has important implications for portfolio choice, which Kinlaw, Kritzman, and Mao explore in this article.TOPICS: Private equity, exchange-traded funds and applications, performance measurement