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Is Your PE Portfolio Too Big, Too Small or Just Right?

presented-by-peracsAny investor seeks to not only mitigate risk but gain exposure to potential outperforming returns through diversification of one’s portfolio. It’s a primary reason institutional investors seek out private equity. They take on the asset class’ inherent illiquidity and other associated risks by committing to a number of funds or perhaps seek diversity through a fund of funds vehicle.

As investors look to both maximize returns and mitigate risk, is there an ideal number of investments that investors should maintain in their portfolio? A recent research study conducted by PERACS’ Oliver Gottschalg as well as Dr. Ralf Gleisberg and Ramun Derungs of Akina, the European lower and middle-market investment adviser to private equity programs, provides some insight.

They found that an optimally diversified portfolio consisted of about 15 funds. “With this portfolio size the diversification effect comes already into play. While the range between the best and worst possible outcome of 1000 simulated portfolios with a single underlying fund goes from 0.02x to 6x, already a diversification across 15 primary funds reduces this range to [1.2x, 2.6x].”


Their research was recently featured in a Wall Street Journal article entitled, “5 Ways to Build the Perfect Private Equity Portfolio.

To learn more about the details of their research, click here.