Are private equity fund managers up to the job when it comes to predictable, persistent performance?

IN the private equity universe, the internal rate of return (IRR) is the key performance indicator. It measures the annualised yield achieved over the holding period of an investment. Yet the IRR is not a scientific method to calculate performance. Far from it. Fund managers can manipulate, misreport, or altogether fabricate their results, making them unreliable.

But a larger question for prospective investors is whether private fund managers possess unique skills that can somehow provide certainty or, at the very least, predictability. An affirmative answer implies private equity (PE) fund managers have talent and don't rely on serendipity to deliver performance.

Myth: Performance is predictable