A Dynamic Model of Private Asset Allocation
Portfolio Management
2025-03-04 v1
Abstract
We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and eventual distributions, (3) time-varying business cycle conditions, (4) serial correlation in observed private asset returns, and (5) regulatory constraints on certain institutional investors' portfolio choices. We use cutting-edge machine learning methods to quantify the optimal investment policies over the life cycle of a fund. Moreover, our model offers regulators a tool for precisely quantifying the trade-offs when setting risk-based capital charges.
Keywords
Cite
@article{arxiv.2503.01099,
title = {A Dynamic Model of Private Asset Allocation},
author = {Hui Chen and Giovanni Gambarotta and Simon Scheidegger and Yu Xu},
journal= {arXiv preprint arXiv:2503.01099},
year = {2025}
}