At the Private Equity International Investor Relations Conference in New York today, Dennis K. Berman, Deputy Bureau Chief for Money and Investing, Wall Street Journal declared and defended his skepticism of the private equity industry’s claim to exceptional performance. In conversation with Peter McKillop, Director of Global Communications, Kohlberg Kravis Roberts and Co., Berman noted that returns for the LBO Private Equity model overall are roughly equivalent to using leverage to invest in an Standard and Poor’s exchange traded fund. While KKR’s McKillop took exception citing his firm’s performance, which Berman accepted noting that every firm touts their exceptionalism but that the asset class itself was not.
Judging the returns of an asset class is a relatively straightforward exercise, but the judgement whether to invest in a given asset class is determined as much by a given investor’s / limited partner’s portfolio strategy as it is by a snapshot of performance in an asset for any given time period. While it only tracks publicly traded assests, take a look at Callan Associates Periodic Table of Investment Returns 1990-2009 (see below. You can download the full pdf here.). In this case asset class performance is a factor of time. It seems better to ask, ‘is private equity as an asset class newsworthy?’