re: Private Equity investment. Anyone used PE to generate alpha?

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I don’t buy the whole uncorrelated narrative, but PE may have a place in a portfolio. The “problem” I have is PE returns have been diminishing vs public market equivalent returns for quite some time now, and the after-tax returns often close the rest of the gap. There is still room for outperformance in some markets, and Asia may be one of them, but the trend isn’t very exciting when you consider you’ll be tying money up for 6+ years.

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And there lies the rub.

Are they really generating alpha or is it just them pouring on the leverage and getting away with it?

Honestly, net IRR >15% seems insanely impressive to me (I guess I'm easily impressed) particularly if it's uncorrelated and the risks are lower. But that also makes me think they're just leveraging up and calling it a day.

I read a recent report by INVESCO that argued that the correlation was only 0.46 between the stock market and PE firms.

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the trend isn’t very exciting when you consider you’ll be tying money up for 6+ years.

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That's fair enough. Some hedgefunds are also open to me but they also have some rules regarding withdrawal. I'm okay with tying up money for 6+ years - it's not money I need immediately.

I guess I'm hoping I've not missed the boat here.



Also, side note, did you study at Stanford? Kudos if that's the case.