Saturday, February 9, 2013

Should you add Private Equity to add diversification?

Probably not - from the Economist.

Let's look at a few characteristics of Private Equity.

1. PE has crazy high fees - 2/20.
2. PE underperforms
3. PE has artificially low volatility because its values are assessed by management (not the market).
4. PE is horribly illiquid.

All in all Private Equity sounds awful.  And yet institutional investors line up for it.

HT: Finance II at Tepper.