There has been a flood of funds into private equity markets under the belief that there is some special investment magic with these firms and the managers who build these portfolios. The recent data suggests that this is not the case. The rationale for private equity is simple. Buy new quality firms vetted by managers who will engage with these firms to turn them into successful investments that can then be IPO'ed as an exit strategy. Investing in a private equity portfolio will have an illiquidity premium, you will be paid for your patience and inability access your money. Some of the latest evidence provided by Macro Hive suggests that the key assumptions do not work.
Investors are not receiving the returns expected relative to public investments which would not be troubling in the short run if you were getting your money back. Unfortunately, are seeing long holding times because there are no exits.
Perhaps holding liquid strategies may not as some have thought. Yes, you face mark-to-market risk, but if you are unhappy with returns, you can get your money back.
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