Note on Pe Asset Allocation

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Case # 5-0015

Updated August 18, 2003

Note on Private Equity Asset Allocation
Over the past 20 years, managers of institutional capital have increasingly allocated more funds to private equity. During that time period, private equity has been an asset class with relatively high returns compared to public stock market indices. However, the recent economic downturn has made it clear that this asset class also has significant risks. This note describes the characteristics and challenges of private equity as an asset class. The table below shows a sample of recent publicly announced changes in allocations to private equity by major institutional investors in 2002 and 2003. Fund Size ($Bn) 275 136 108 106 46 25 24 23 21 11 10 Old Alloc. 0% 6% 5% 3% 3% 0% 11% 3% 0% 25% 0% New Alloc. 1% 7% 8% 4% 6% 1% 8% 6% 4% 18% 2% Net Change ($Bn) 2.8 1.4 3.2 1.6 1.4 0.2 -0.7 0.7 0.8 -0.8 0.2

Organization TIAA-CREF CalPERS CalSTRS FL St Bd of Admin State of Wisconsin IB Maryland St Ret Pens Sys Colorado PERA Illinois TRS PennSERF Yale Indiana PERS

Type Private Pension State Pension State Pension State Pension State Pension State Pension State Pension State Pension State Pension Endowment State Pension

Action New Increase Increase Increase Increase Increase Decrease Increase New Decrease New

This case was written by Rob Hatch T’04 and Adjunct Assistant Professor Fred Wainwright under the supervision of Professor Colin Blaydon of the Tuck School of Business at Dartmouth College. It was written as a basis for class discussion and not to illustrate effective or ineffective management practices. Copyright © 2003 Trustees of Dartmouth College. All rights reserved. To order additional copies, please call (603) 646-0522. No part of this document may be reproduced, stored in any retrieval system, or transmitted in any form or by any means without the express written consent of the Tuck School of Business at Dartmouth College.

Note on Private Equity Asset Allocation...
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