The Persistence of PE Performance

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Private equity (PE) investments have become an increasingly important allocation in institutional portfolios. However, investing in private equity requires considering several factors not relevant to investments in public equity. Perhaps the biggest difference is that a commitment in a private equity fund is not an investment in existing (e.g., publicly traded) securities with a manager whose track record is easily observed. In fact, because investors almost never have information on what companies they will be investing in, they are putting faith in an organization, a fund’s stated investment strategy, and even specific individuals.

Greg Brown, Ph.D., Frank Hawkins Institute of Private Enterprise
Wendy Hu, Ph.D., Burgiss
Kelly Meldrum, CFA Adams Street Partners
Raymond Chan, CFA, FRM, Adams Street Partners and
Tobias True, CFA, FRM, Adams Street Partners

Private equity (PE) investments have become an increasingly important allocation in institutional portfolios. However, investing in private equity requires considering several factors not relevant to investments in public equity. Perhaps the biggest difference is that a commitment in a private equity fund is not an investment in existing (e.g., publicly traded) securities with a manager whose track record is easily observed. In fact, because investors almost never have information on what companies they will be investing in, they are putting faith in an organization, a fund’s stated investment strategy, and even specific individuals.

Greg Brown, Ph.D., Frank Hawkins Institute of Private Enterprise
Wendy Hu, Ph.D., Burgiss
Kelly Meldrum, CFA Adams Street Partners
Raymond Chan, CFA, FRM, Adams Street Partners and
Tobias True, CFA, FRM, Adams Street Partners

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