Private equity is making lousy returns for its investors, according to a French Professor from the HEC business school in Paris, in a survey submitted to the European parliament last week.
Professor Oliver Gottschlag found out that average returns from private equity investments underperformed the S&P’ 500 share index by 3 per cent after fees charged to its investors.
However the bosses of the private equity firms are still doing very nicely thank you, generating twice the returns for themselves, than they do for their investors.
Moreover, said Gottschlag, private equity companies had a method of calculating returns which meant they routinely overstated the real rate of return to their investors.
Gottschlag teased the private equity industry by saying he had never met a general partner who said their firm was anything other than a top quarter performer in the private equity industry.
“I wonder”, he said, “where three quarters of the industry is hiding.”
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