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Private Equity: Overvalued and Overrated?
- yarapavan 9y agoFrom 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.
- yarapavan 9y agoWhen 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.