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Private equity funds of funds represent financial intermediaries which invest in private equity funds.
Private equity funds typically have a limited partnership structure, with investors in the fund becoming limited partners (LPs) and fund managers acting as general partners (GPs). By pooling capital from outside investors to invest in other private equity funds, private equity funds of funds provide an additional layer of intermediation (Harris et al. 2018). Funds of funds furthermore open opportunities around debt leverage with consequences for both LPs and portfolio firms. On the one hand, this may allow for a greater flexibility in an era of high interest rates, when many PE partnerships have faced challenges in securing additional credit. On the other hand, this may make it harder to accurately calibrate risk for both LPs and individual portfolio firms.
Private equity investments in direct funds often...
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References
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Manac, RD., Wood, G. (2024). Fund of Funds. In: Cumming, D., Hammer, B. (eds) The Palgrave Encyclopedia of Private Equity. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-38738-9_165-1
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DOI: https://doi.org/10.1007/978-3-030-38738-9_165-1
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