20% PE return these days is .. it's top quartile. I suspect it's top decile. (Thinking buyout funds rather than venture. Venture returns will be all over the map, but the last 3 years I suspect very low to even negative (although that may not, as yet, be reflected in the fund valuations)).2% plus 20% of profits is highly unusual. That's a hedge fund formula, not PE. I'm in both a private credit and private equity fund (about 5% of my investments once all capital call are complete). These are with a very well known firm that I've worked with professionally for many years. Returns so far have been as expected in the offering memoranda (11% for PC, 20% for PE). Their fees top out at 1.75%, ie that's the highest % and can only go lower if performance is lower that expected. I would avoid this kind of thing unless you are very familiar with the fund, and the fund has a track record of at least 15-20 years. The one I'm in has been managing money for 30 years, I know the partners well, and this is the vehicle through which they manage their own wealth. Also, I could lose 100% of this piece and not really feel it (just a slightly smaller estate to leave). This is my relatively small dice roll in an otherwise very boglehead portfolio. "I know a guy..." isn't good enough for this sort of investment.
Private Credit has been on a tremendous roll. Things are going to get a lot tougher and more competitive from here -- if you look at the money flows into the asset class (and conflicts of interest all over the place, with the same firm's credit and PE funds owning slices of the deal).
So yes, one does need to know well the fund & team behind it.
Statistics: Posted by Valuethinker — Sun Mar 09, 2025 4:33 am — Replies 59 — Views 4782