The size of venture capital and private equity fund portfolios

Gennaro Bernile, Douglas Cumming, Evgeny Lyandres

Research output: Contribution to journalArticleResearchpeer-review

19 Citations (Scopus)


We propose a model that examines the optimal size of venture capital and private equity fund portfolios. The relationship between a VC and entrepreneurs is characterized by double-sided moral hazard, which causes the VC to trade off larger portfolios against lower values of portfolio companies. We analyze the structural relations between the VC's optimal portfolio structure and entrepreneurs' and VC's productivities, their disutilities of effort, the value of a successful project, and the required initial investment in a venture. We also test the model's predictions using a small proprietary dataset collected through a survey targeted to VC and private equity funds worldwide.

Original languageEnglish
Pages (from-to)564-590
Number of pages27
JournalJournal of Corporate Finance
Issue number4
Publication statusPublished - Sept 2007
Externally publishedYes


  • Fund portfolio
  • G24
  • Private equity
  • Venture capital

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