This is a great observation. I've got a question about the methodology -- why did you assume a holding period of 5 years? Isn't the usual fund life 10 years? And if that's the case, then returns (as a rate) are even lower.
Thank you Ludovic. What does it look like when you extend the analysis to all funds in the market (in terms of mean, median, standard deviation), broken down by AUM size and fund structure (evergreen vs closed-end)?
You are an institutional allocator. Would you rather:
a) Invest in a broad equity tracker fund*? Sit on it, do nothing, exit anytime
b) Invest with the Big Boys of PE? Lots of documents sent, lots of work for your back office, meet high-level people, invitations to fancy restaurants, the occasional Miami conference, endless conversation topics, exit gradually (maybe in 10Y).
*Ex: Vanguard All World (VWRP; 0.19% fees); 5Y multiple = 1.7
Noticed that Tommy Fleetwood (#6 ranked golfer in the world) is now wearing a Blackstone cap. A round with him (or a few holes & a pint ) is not part of the inducement offered by index funds, I believe.
This is a great observation. I've got a question about the methodology -- why did you assume a holding period of 5 years? Isn't the usual fund life 10 years? And if that's the case, then returns (as a rate) are even lower.
Apollo - 1.39x - 3.4%
Blackstone - 1.59x - 4.7%
Carlyle - 1.55x - 4.5%
KKR - 1.79x - 5.9%
What are the risk-adjusted returns, not just the nominal returns?
Does it matter ? You can't spend 'risk-adjusted' etc etc
Of course it matters. If you don’t understand the difference you need to go back and learn it.
Thank you Ludovic. What does it look like when you extend the analysis to all funds in the market (in terms of mean, median, standard deviation), broken down by AUM size and fund structure (evergreen vs closed-end)?
Assuming you'll get a 1.7x multiple in 5 years.
You are an institutional allocator. Would you rather:
a) Invest in a broad equity tracker fund*? Sit on it, do nothing, exit anytime
b) Invest with the Big Boys of PE? Lots of documents sent, lots of work for your back office, meet high-level people, invitations to fancy restaurants, the occasional Miami conference, endless conversation topics, exit gradually (maybe in 10Y).
*Ex: Vanguard All World (VWRP; 0.19% fees); 5Y multiple = 1.7
Noticed that Tommy Fleetwood (#6 ranked golfer in the world) is now wearing a Blackstone cap. A round with him (or a few holes & a pint ) is not part of the inducement offered by index funds, I believe.
The thought of it 😂