{"id":44216,"date":"2017-08-01T04:03:53","date_gmt":"2017-08-01T02:03:53","guid":{"rendered":"https:\/\/newserver.fyb.de\/produkt\/research-study-size-matters-small-is-beautiful\/"},"modified":"2017-08-01T04:03:53","modified_gmt":"2017-08-01T02:03:53","slug":"research-study-size-matters-small-is-beautiful","status":"publish","type":"product","link":"https:\/\/www.fyb.de\/en\/produkt\/research-study-size-matters-small-is-beautiful\/","title":{"rendered":"Research study: Size Matters \u2014 \u201cSmall is Beautiful"},"content":{"rendered":"

Prof. Oliver Gott\u00adschalg, PhD<\/strong> \u2014 Stra\u00adtegy and Busi\u00adness Policy HEC, Paris<\/p>\n

Dr. Ralf Gleis\u00adberg<\/strong> \u2014 Part\u00adner at Akina, Zurich<\/p>\n","protected":false},"excerpt":{"rendered":"

In the current low inte\u00adrest rate envi\u00adron\u00adment, the \u201cprivate equity\u201d asset class is enjoy\u00ading great popu\u00adla\u00adrity among inves\u00adtors. Nevert\u00adhel\u00adess, many inves\u00adtors are strugg\u00adling with the stra\u00adte\u00adgic allo\u00adca\u00adtion of capi\u00adtal within the asset class. Inves\u00adtors need to make funda\u00admen\u00adtal decis\u00adi\u00adons in their port\u00adfo\u00adlio cons\u00adtruc\u00adtion regar\u00adding the number of fund invest\u00adments, the geogra\u00adphic focus as well as the size of the funds. In this context, there is little evidence to date on the extent to which these decis\u00adi\u00adons affect the risk\/return profile of a portfolio.<\/strong><\/p>\n

The search for the risk\/return charac\u00adte\u00adristics of opti\u00admal private equity port\u00adfo\u00adlios is the objec\u00adtive of a rese\u00adarch study* conduc\u00adted jointly by Akina and Prof. Oliver Gott\u00adschalg. To obtain valid results, a broad data\u00adbase of 771 Euro\u00adpean and North Ameri\u00adcan primary funds from the vintage years 1998 2007 was analy\u00adzed. From this data set, Monte Carlo simu\u00adla\u00adti\u00adons are used to gene\u00adrate 1,000 random port\u00adfo\u00adlios. To show the influence of the diver\u00adsi\u00adfi\u00adca\u00adtion effect, the port\u00adfo\u00adlio sizes vary (1, 5, 10, 15, 20, 25, 30, 50 or 100 under\u00adly\u00ading funds respec\u00adtively). In order to isolate the influence of further factors on returns and risk, the data\u00adbase is subse\u00adquently divi\u00added into subsets and analyzed.<\/p>\n

For each of these port\u00adfo\u00adlios, we calcu\u00adlate the average return as well as the return distri\u00adbu\u00adtion. The latter is calcu\u00adla\u00adted in two ways. On the one hand, we use the tradi\u00adtio\u00adnal approach, which focu\u00adses on the spread between the mini\u00admum and maxi\u00admum port\u00adfo\u00adlio return. On the other hand, we choose an approach newly deve\u00adlo\u00adped by PERACS that graphi\u00adcally depicts the distri\u00adbu\u00adtion of returns within a portfolio.<\/p>\n

An opti\u00admally diver\u00adsi\u00adfied port\u00adfo\u00adlio conta\u00adins about 15 funds<\/strong><\/p>\n

How much diver\u00adsi\u00adfi\u00adca\u00adtion is neces\u00adsary in a private equity port\u00adfo\u00adlio to signi\u00adfi\u00adcantly reduce risk compared to indi\u00advi\u00addual fund invest\u00adments? Our study results indi\u00adcate that an opti\u00admally diver\u00adsi\u00adfied port\u00adfo\u00adlio consists of about 15 funds (see Fig. 1). At this size, the diver\u00adsi\u00adfi\u00adca\u00adtion effect alre\u00adady takes full effect. In addi\u00adtion, resource-inten\u00adsive over\u00addi\u00adver\u00adsi\u00adfi\u00adca\u00adtion is avoided, where the margi\u00adnal utility in terms of further risk reduc\u00adtion decrea\u00adses shar\u00adply. While for \u201c1\u2011fund\u201d port\u00adfo\u00adlios the return range is from 0.02x to 6x, this is alre\u00adady redu\u00adced to [1.2x vs. 2.6x] for 15 funds.<\/p>\n","protected":false},"featured_media":41379,"comment_status":"open","ping_status":"closed","template":"","meta":{"wp_typography_post_enhancements_disabled":false},"product_brand":[],"product_cat":[2452,2552,2609,2611],"product_tag":[1771,2208,2267,2274,2357,2360,2363,2367,2373],"class_list":{"0":"post-44216","1":"product","2":"type-product","3":"status-publish","4":"has-post-thumbnail","6":"product_cat-ebook-en","7":"product_cat-fyb-2016-en","8":"product_cat-prof-oliver-gottschalg-phd-en","9":"product_cat-dr-ralf-gleisberg-en","10":"product_tag-asset-class","11":"product_tag-ralf-en","12":"product_tag-gottschalg-en","13":"product_tag-oliver-en","14":"product_tag-gleisberg-en","15":"product_tag-low-interest-rate-environment","16":"product_tag-capital-allocation","17":"product_tag-yield-distribution","18":"product_tag-private-equity-portfolio-en","19":"pa_sprache-english-3","20":"pa_sprache-german","22":"first","23":"outofstock","24":"taxable","25":"shipping-taxable","26":"purchasable","27":"product-type-variable"},"yoast_head":"\nResearch study: Size Matters - "Small is Beautiful - FYB Financial Yearbook<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.fyb.de\/en\/produkt\/research-study-size-matters-small-is-beautiful\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Research study: Size Matters - "Small is Beautiful - FYB Financial Yearbook\" \/>\n<meta property=\"og:description\" content=\"In the current low interest rate environment, the "private equity" asset class is enjoying great popularity among investors. Nevertheless, many investors are struggling with the strategic allocation of capital within the asset class. Investors need to make fundamental decisions in their portfolio construction regarding the number of fund investments, the geographic focus as well as the size of the funds. In this context, there is little evidence to date on the extent to which these decisions affect the risk\/return profile of a portfolio. The search for the risk\/return characteristics of optimal private equity portfolios is the objective of a research study* conducted jointly by Akina and Prof. Oliver Gottschalg. To obtain valid results, a broad database of 771 European and North American primary funds from the vintage years 1998 2007 was analyzed. From this data set, Monte Carlo simulations are used to generate 1,000 random portfolios. To show the influence of the diversification effect, the portfolio sizes vary (1, 5, 10, 15, 20, 25, 30, 50 or 100 underlying funds respectively). In order to isolate the influence of further factors on returns and risk, the database is subsequently divided into subsets and analyzed. For each of these portfolios, we calculate the average return as well as the return distribution. The latter is calculated in two ways. On the one hand, we use the traditional approach, which focuses on the spread between the minimum and maximum portfolio return. On the other hand, we choose an approach newly developed by PERACS that graphically depicts the distribution of returns within a portfolio. An optimally diversified portfolio contains about 15 funds How much diversification is necessary in a private equity portfolio to significantly reduce risk compared to individual fund investments? Our study results indicate that an optimally diversified portfolio consists of about 15 funds (see Fig. 1). At this size, the diversification effect already takes full effect. In addition, resource-intensive overdiversification is avoided, where the marginal utility in terms of further risk reduction decreases sharply. 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