The volatility laundering, return manipulation and ‘phoney happiness’ of private equity
The widening performance gap between public and private markets is a huge topic these days. Investors are often seen as the gormless dupes falling for the “return manipulation” of cunning private equity tycoons. But what if they are co-conspirators?
That’s what a new paper from three academics at the University of Florida argues. Based on nearly two decades worth of private equity real estate funds data Blake Jackson, David Ling and Andy Naranjo conclude that “private equity fund managers manipulate returns to cater to their investors”.
This is not an entirely new suggestion. Academics (and some practitioners) have boggled for years over why investors seem willing to pay extra for illiquidity, completely contrary to what financial theory and common sense would seem to suggest.
This story originally appeared on: Financial Times - Author:Robin Wigglesworth
