
Private Equity: Overvalued and Overrated? - yarapavan
https://americanaffairsjournal.org/2018/02/private-equity-overvalued-overrated/
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yarapavan
When institutional investors criticize the “short-termism” of public equity
markets, perhaps they are really critiquing the transparency of market
valuations. The internet and big data have made the inability of most
investors to beat the public equity index much more obvious, leading to the
rise of passive, low-cost index investing. Perhaps it is no surprise then that
highly paid investment managers prefer to move money into private markets,
where the numbers are fuzzier and where it takes years rather than minutes for
the consequences of bad decisions to be realized.

So PE firms end up adding debt in hopes of enhancing returns and using phony
accounting to conceal volatility. And the institutional investors that have
flooded private equity with capital prefer this “phony happiness” because it
reduces career risk and the hard work of having to explain the volatility of
public markets to stakeholders.

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yarapavan
From the author, Dan Rasmussen, tweet:

I have studied private equity for the past 7 years. I just published this
article that summarizes everything I have learned.

