Picking partners: Manager selection in private markets

We study the selection of private market managers (GPs) for over 61,000 capital commitments by institutional investors (LPs) from a feasible opportunity set. LPs chase past performance but also seem surprisingly willing to invest in GPs without a track record: the probability that LPs select first-time or young GPs is quantitatively similar to GPs in the highest quartile of past performance. The most plausible explanation is that there is demand for exposure to private markets that is not fulfilled by incumbent GPs. The proclivity to invest in first-time or young GPs is not associated with higher future performance.