Summary

Abstract

Very different portfolio strategies can be observed across PE funds. Some PE funds are highly specialized, whereas others are highly diversified. The decision determining portfolio composition plays a crucial role in the formation of a PE fund. It is a long term strategic decision that is difficult to change. The objective of this thesis was to examine the economics underlying the different portfolio strategies applied by PE funds. In order to do so, three steps were accomplished: (1) the relationship between diversification and performance of PE funds was evaluated in a theoretical model, (2) the determinants driving the choice of portfolio strategies by PE firms were analyzed in multivariate regressions, and (3) the impact of different portfolio strategies on the performance of PE funds was studied. A portfolio strategy of a PE fund was defined as its level of diversification across the number of portfolio companies, time, financing stages, industries, and countries. In the following, the main results are summarized.