Has private equity delivered on its high risk-high return mandate?
Relatively few private equity managers in India have an exit track record, and it is unlikely to be as watertight as the well-regulated track record of a public equity mutual fund. Global studies, such as one done by Preqin, on 4900 private equity funds (representing 65% of the AUM in private equity globally), shows that over the long term private equity has had limited success compared to public equity, and in the last year, private equity managers have underperformed public equity managers on the aggregate. This is especially likely to be true in Indian markets, where private equity is more “perfectly priced”, with everyone chasing the same handful of deals and promoters that don’t leave very much on the table. Moreover with private equity managers charging large carry and most public equity managers operating on a fixed fee model, private equity is likely to be behind net of fees, unless PE managers are truly delivering 4x or 5x returns on their entire portfolio. Near perfect pricin
