Beyond the J Curve
Chapter One
Introduction
David Rubenstein, co-founder of the Carlyle Group, has been said to compare private equity
with sex. According to him, if one tries out either one with reasonable expectations, one
should be pleased with the results. To quote the Yale endowment 2002 annual report,
private equity "offers extremely attractive long-term risk-adjusted return characteristics,
stemming from the University's strong stable of value-added managers that exploit market
inefficiencies". Certainly many potential investors will find annualised private equity returns
of 29% to the Yale University's endowment, since the inception of their programme in 1973
until 2003 as a "sexy" opportunity.
Unfortunately, such return expectations may often be juvenile and slightly exaggerated.
One will be definitely disappointed if quick results are expected. As Raschle & Ender
(2004) observed, the "overall private equity market has historically not delivered the often
mentioned 'guaranteed' top return. Since the early 1980s the market size has developed
approximately in line with the required return for private equity, which is basically the
public market return plus an illiquidity premium". Private equity is l ... read full excerpt from Beyond the J Curve: Managing a Portfolio of Venture Capital and Private Equity Funds ebook
