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Journal Articles CFA Digest Year : 2009

The Performance of Private Equity Funds


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.
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hal-00458110 , version 1 (19-02-2010)



Oliver Gottschalg, Ludovic Phalippou. The Performance of Private Equity Funds. CFA Digest, 2009, Vol. 39, n° 4, pp. 8-10. ⟨10.2469/dig.v39.n4.7⟩. ⟨hal-00458110⟩


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