Is Private Equity Fooling Investors?

A recent CFA Institute article considers whether private equity (PE), which it describes as the most popular alternative asset class, provides “uncorrelated  returns relative to equities.” Here are some key takeaways: The absence of performance metrics for alternative assets classes makes it difficult to analyze PE returns, the article says, and “creates an information asymmetry that favors the asset manager over the investor.” PE returns are reportedly calculated by “money-weighting them in contrast to the… Read More

Swedroe: Private Equity Hurts Investor Wealth

While private equity has made some wealthy, recent studies have shown that regular investors have not been the beneficiaries of this wealth. This according to an article by Larry Swedroe in Advisor Perspectives. Swedroe writes that the research concludes, “private equity has not outperformed publicly available mutual funds on a risk-adjusted basis. And that does not even account for the liquidity that private equity investors forfeit.” He cites one paper by Harvard University’s Erik Stafford… Read More

Five Questions: Private Equity in Public Markets with Brian Chingono

By Jack Forehand (@practicalquant) —   There are many misconceptions about private equity investing. Many investors view it as a domain where the rich and institutions earn outsized returns that are not available to the average person. It is viewed as an exclusive club with huge benefits that only the elite can be part of. But at its core, private equity is just investing in companies much like public investing is. It is a bet on the… Read More

Private Equity Versus Stock Market Returns

A recent article in The Wall Street Journal offers insights regarding the comparison of returns between private equity and the stock market. The article makes the following points: While the above graph “looks nice and simple,” the comparison (developed using an index developed by research firm Preqin), “is a theoretical construction, and that underscores the difficulties in comparing public and private investing.” It adds that private-equity firms keep investor dollars locked up for long periods… Read More