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Investor expertise and private investment selection
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DOI：10.1016/j.jfineco.2026.104331.png)
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Abstract
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Institutional and individual investors evaluate private market opportunities systematically differently, even facing identical choices. In a survey experiment, 593 institutional and 445 individual investors assess venture capital fund profiles with independently randomized GP characteristics. Institutions heavily weight past fund performance, consistent with risk-averse investor demand calibrated to VC markets. Individuals largely ignore performance, favoring educational credentials instead. A follow-up experiment identifies two independent mechanisms: individuals lack awareness that VC performance persists and discount quality signals for funds they perceive as inaccessible. Performance-based selection alone reduces individuals’ expected returns by approximately 7%, accounting for 20% of the return gap with professionals.
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