The Performance of Private Equity Funds

Oliver Gottschalg () and Ludovic Phalippou
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Oliver Gottschalg: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: The authors contend that the performance of private equity funds (PEFs) reported by prior studies and industry associations is overstated for two reasons--inflated accounting valuation of ongoing investments and a bias toward better-performing funds. The findings in this article show that PEFs outperform the S&P 500 Index by 3 percent on a gross-of-fees basis. But on a net-of-fees basis, PEFs underperform by 3 percent, and adjusting for risk makes it even worse at 6 percent underperformance per year. The high fee structure is the major contributing factor for PEF underperformance. Despite performance weaknesses, certain investors invest in PEFs for side benefits and motives beyond maximizing returns.

Keywords: Alternative Investments; Private Equity; Performance Measurement and Evaluation; Performance Measurement; Performance Attribution (search for similar items in EconPapers)
Date: 2009-11
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Citations: View citations in EconPapers (140)

Published in CFA Digest, 2009, Vol. 39, n° 4, pp. 8-10. ⟨10.2469/dig.v39.n4.7⟩

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Related works:
Journal Article: The Performance of Private Equity Funds (2009)
Working Paper: The Performance of Private Equity Funds (2009)
Working Paper: The performance of private equity funds (2006)
Working Paper: The Performance of Private Equity Funds (2006)
Working Paper: The Performance of Private Equity Funds (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00458110

DOI: 10.2469/dig.v39.n4.7

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