Pension Funds Can Only Guess at Private Equity’s Cost


Curtis M. Loftis Jr., South Carolina’s treasurer, has pushed to learn more about private equity fees.CreditDale W. Ferrell for The New York Times

Partnership agreements outlining private equityfirms’ practices are as closely guarded as the recipe for Coca-Cola.

Indeed, when it comes to secrecy, few industries do it better than private equity. To outsiders, the lucrative business of borrowing money, buying companies and hoping to sell them later at a profit is as impenetrable as a lockbox. Rates of return and hidden costs are difficult to identify, even for investors in these deals.

While top-line fees associated with these funds are well known — management typically charges investors 1 to 2 percent of assets and about 20 percent of portfolio gains — many charges are hidden from view. These include transaction fees, legal costs, taxes, monitoring or oversight fees, and other expenses charged to the portfolio companies held in a fund…

Pension Funds Can Only Guess at Private Equity’s Cost

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