Deals
Private Equity’s Returns Questioned, This Time by Buffett
- Method for calculating fees has long been subject to dispute
- Investors need not be ‘Jedi mind-tricked,’ Auerbach says
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Private equity firms, which are attracting record amounts of investor funds, have for years faced criticisms that they game their returns. Over the weekend, billionaire Warren Buffett joined the chorus.
The Berkshire Hathaway Inc. chairman and chief executive officer said firms make their performance appear better than it is. Firms will include money that’s waiting to be deployed, such as funds sitting in Treasury bills, when charging management fees. But they’ll exclude those funds when calculating the internal rate of return -- the performance measure in which most funds are judged, Buffett said.