RT Journal Article
SR Electronic
T1 Private Equity Within a Utility Framework
JF The Journal of Investing
FD Institutional Investor Journals
SP 17
OP 25
DO 10.3905/joi.2002.319491
VO 11
IS 1
A1 Mark J.P. Anson
YR 2002
UL https://pm-research.com/content/11/1/17.abstract
AB Interest in private equity investments has grown tremendously in the past decade. This article examines the value of private equity in a diversified portfolio within an expected utility framework. Relative levels of risk aversion are set for low, moderate, and high risk-averse investors. It is demonstrated that the higher the risk aversion of an investor, the greater the investor's portfolio allocation should be to private equity. Additionally, as the level of private equity investment increases, so does the Sharpe ratio of the investor's portfolio. It is demonstrated that the marginal utility of private equity investing is positive at all levels of risk aversion.