June 1, 2022
The Myth of Private Equity: An Inside Look at Wall Street’s Transformative Investments
Jeffrey C. Hooke
A former investment banker himself, the author has an insider’s view of the private equity industry. Over 90% of the largest state and municipal pension plans invest in private equity and the author argues that this is a mistake. Hooke claims performance reporting is questionable, and the fees are outrageous compared with a simple, low-cost 60% / 40% index fund allocation. Academic studies suggest performance has trailed the broader public market since 2006. Like in public equity, it is difficult to determine which private equity managers will succeed in the future. We concur that today’s ultra-low rate environment has likely pushed some large investors into illiquid and expensive private equity funds, but we also think allocators with a thoughtful process can lead to investment with top quartile private equity managers. Those investments have far outpaced public markets.