Surowiecki on PE

James Surowiecki on private equity is worth reading. While I largely agree with him, there is substantial variation in the degree to which private equity firms rely on the zero sum value extraction/financial engineering that he describes to drive returns. In Bain Capital’s defense, they relied more heavily on strategic considerations/hands on consulting than other comparable PE firms, which can be seen by looking at how long it took for Blackstone or KKR to establish large scale internal consulting operations. With that said, Bain Capital certainty made a lot of money from the financial engineering component as well – I just don’t think it was the primary consideration when evaluating investments.

About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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