Business, Management and Accounting
4 years ago

Private equity investors may be fooled by opaque fee contracts.

The Journal of Economic Perspectives
Beware of Venturing into Private Equity
Ludovic Phalippou

Paper Summary

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The article warns against investing in private equity, suggesting that the governance structure may not reduce conflicts as claimed. Private equity funds perform well before fees, but not after. Investors may be misled by opaque fee contracts, leading to costly provisions that don't align incentives properly. It's not clear if agency conflicts are lower in private equity compared to public equity.