This chapter aims to place the asset class private equity in the framework of principal-agent theory. Section 2.1 develops a generic theory of fund investments. Key corollaries of this theory are that investors must take special care to a) choose funds in accordance with their risk-sharing preferences, and b) then to select funds out of a group of possible alternatives. In section 2.2, existing empirical research is examined in light of this proposition, before the chapter is concluded in section 2.3.
KeywordsVenture Capital Pension Fund Private Equity Fund Investment Venture Capital Fund
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