Using a large sample of institutional investors' private equity investments in venture and buyout funds, we estimate the extent to which investors' skill affects returns from private equity investments. We first consider whether investors have differential skill by comparing the distribution of...

This paper presents a model of the financial structure of private equity firms. In the model, the general partner of the firm encounters a sequence of deals over time where the exact quality of each deal cannot be credibly communicated to investors. We show that the optimal financing arrangement...