an age of dead unicornsimagecreditharry campbellit is not all unicorns and roses with private equity academics like josh lerner and steven kaplan have found that those seeking such fantastic returns do not always find itstudies have shown that when it comes to private equity not all funds are the same and further that the bigger and longerlasting funds are the more profitable superachievers in the top quartile include kohlberg kravis which has had a 26 percent net return for its longterm funds since inception in 1976 and apollo with a 25 percent net return since inceptionnewer funds tend to find it a harder oar to row and have lower returns in addition endowments historically have benefited more from private equity most likely because they can invest in the better funds thanks to better access and private equity returns have come down a bit in recent years though the last few years have been exceedingly good for private equity as the stock market bubbled alongthe higher returns of private equity are justified in part as extra compensation to satisfy investors for the illiquidity and theoretical higher risk but how much more this return should be is subject to some debate some including mr swensen have suggested that private equity should outperform a leveraged investment in the standard poors 500stock index since that is after all what a private equity investment is a fund borrowing money to buy companiesthe gurus though may be overestimating the return required of private equity for both its illiquidity and risk there are benefits to having a fund manage your investment and private equity is quite a capable manager during the financial crisis many of these funds were able to salvage near bankrupt investments and turn them into profitstake calpers again much has been made of the fact that the funds private equity investments have not exceeded its benchmark in recent years although they have done so over a 20year period but the benchmark itself may be at fault it is an amalgamation of domestic and foreign stock market indexes with a random number 3 percent tacked on whether this benchmark captures the risk and steady return potential of private equity seems unclear calpers is reevaluating this benchmark and will probably change iteven with all of these caveats there is no doubt that the private equity asset class has been a savior for many pension funds and endowments small pension funds a billion dollars or less still beg to get into larger private equity funds and are regularly turned down it is only a lucky few that get access to the right private equity firmsthe fact that private equity has performed so well over the decades also puts the recent securities and exchange commission investigations into private equity fees into perspective in june the regulator accused kohlberg kravis of improperly assigning more than 17 million in expenses from broken deals or unsuccessful buyouts to investors but not to coinvestors that included executives of the firm kohlberg