Even though most people in the investment world are consistently told that past performance is not indicative of future results, some claims regarding performance of private equity firms can be misleading, according to a recent CFA Institute article.

It says, “humans are hardwired to anchor on repetition, and Nobel Prizes have been won for studies of what are called availability and frequency biases. We tend to be swayed by what we are told over and over again.”

The article takes issue with the claim of some leading investment houses that the factors driving returns in public equity markets don’t impact private equity returns. Private equity, it argues, is “just equity offered in a form that is relatively opaque, illiquid, highly levered, and has high fees and expenses.”

Persistency of performance is falling, the article reports, as evidenced by data from McKinsey & Company:

“Some may counter this by saying that this is why you need institutional-quality consultants and advisers who can cut through the noise and help investors find only the best of the best than can persist,” the article says, adding, “I hate to break it to my professional colleagues, however, but it seems that we often aren’t very good or consistent at picking managers” (a claim it says is supported by research data published in the Journal of Finance).

The article concludes that although some private equity funds and private investment opportunities are “top-notch and worthwhile from both a risk and return perspective,” it is essential to “question bold presentations, especially when they suggest that the future will be like the past.”

“If you hear something that sounds too good,” it says, “step back and ask probing questions.”