The Money behind Private Equity Boom

It is the parterns, which include some of the world's largest and most powerful pension funds, that are funding the unprecedented boom in private equity. In some cases, these pension funds are making private-equity investments on their own, just as any other buyout fund would. The top quartile of funds outperform the public markets. Their returns are typically in 18% range, and some achieve 30% or more, industry insiders say. There is no evidence other PE firms, as a group, outperform the public market. Big pension funds need to put large chunks of capital to work. IT is inefficient to make smaller investments. As result, the big pension funds give money to the proven megafunds taht dominate the top quartile of PR firms. So the PE firms get bigger and bigger.