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Commitment Pacing for Targeting a Fixed Valuation
Sep 1, 2018
In this paper, we study a deceptively simple question: How to maintain — or start — a private-capital program to meet certain goals, such as a valuation goal. For example, suppose one takes over management of a private-capital portfolio at a large pension fund, and is tasked with maintaining a certain valuation. At what rate should one commit capital to best achieve this goal?
This question can be formulated in a several different ways, each leading to an algorithm that dictates the pace at which commitments should be made. We define each of these formulations, construct optimal algorithms, and quantify their performance.
This paper was originally published on Burgiss.com. MSCI acquired The Burgiss Group, LLC in October 2023.
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Research authors
- Luis O’Shea, Executive Director, MSCI Research
- Vishv Jeet
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