Private equity has rarely done good for investors too.

With the boom of popularity of ETFs in the last decades it has been increasingly hard for active fund managers to justify their costs by investing on public markets where benchmarks are visible and public.

Thus they removed themselves from the benchmark entirely and moved to private equity where there's no benchmark and returns are very hard to gauge.

Analysis shows that:

- The overwhelming majority of PEs lose money.

- Annualized return of PE in UK has been 2.1%, this doesn't even match parking money in short-term bonds.

- PE performance is extremely murky, as their gains are virtual and whether you exit profitably is heavily dependent on your timing

- The entire sector is ripe with corruption and little regulatory oversight. PEs keep ballooning their holdings valuations by essentially trading companies among themselves. So fund A sells Acme to to fund B at twice the valuation, and will return the favour by buying Foobar at inflated valuation. This all obviously requires access to cheap credit. Many startups are approached by PEs that have already lined up to sell the startup to another PE after few years guaranteeing everybody (from founders to all the PE managers) nice profits, up to the last sucker stuck with the bill.

The only ones that have profited out of PE, beyond the managers working there, are those that invested in the PE itself, meaning buying shares of the fund itself.

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mbesto 2 days ago | parent | next [-]

Are you referring to Private Equity (as in MBOs/LBOs) or Venture Capital? None of what you're stating is rooted in reality or data. Source: https://www.bain.com/globalassets/noindex/2025/bain-report_g...

> - The overwhelming majority of PEs lose money.

What? No. Read the report:

"Buyout funds continue to outperform public markets in all regions across time horizons longer than five years"

> - Annualized return of PE in UK has been 2.1%, this doesn't even match parking money in short-term bonds.

Once again, read the report.

> The only ones that have profited out of PE, beyond the managers working there, are those that invested in the PE itself, meaning buying shares of the fund itself.

I sold my business to PE and I profited nicely. So I'm not sure what you're concluding here...

Take the parent's post with a grain of salt.

	▲	epolanski 2 days ago \| parent [-]
		Buyouts. For VC we know there is an edge, but that edge belongs predominantly to the top 4. I'm concluding that investors thinking that giving their money to a PE fund hoping to have anywhere near the diversification and returns of a simple global market ETF are in for a rude awakening. Of course you profited nicely, it's who puts the money in the private fund that won't have any chance of beating a very simple global ETF buying your businesses. And gains in those highly unregulated and illiquid markets (that have insane fees) are what they are: virtual. In any case I ain't reading a 68 page report, and have no patience for yet another pointless pitch about PE, everything there was to say about PE can be found in this very simple summary by Ben Felix: https://youtu.be/Ik169Fd_G1E?si=c7a1cu6xC13C0FX6

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disgruntledphd2 2 days ago | parent | prev [-]

I mean, their counter-parties know all of this, but the fact that PE assets don't need to be marked to market on a regular basis can be good for a lot of these investors, as it introduces a delay in the spiral that can otherwise occur with public assets.

Like, if AI collapses, everyone's gonna sell Treasuries to cover losses as they are super liquid (mostly), but the PE assets can pretend that they're still worth whatever, thus reducing margin calls.

PE is generally bad, but their LP's are not entirely stupid and the ability to mark to imagination is worth a bunch of money sometimes.