Brad --

Sure, definitely get it and see where you're coming from. I think this essay would be better if I had asked this question inside of it: would people still set up PE funds if they weren't shortcuts to getting personally rich?

I think that makes it a lot clearer. These things get a lot of reflexive dislike. Is it because they are always and everywhere bad, or because they're considered as a implied fee structure rather than a governance structure?

Your rub question is a good one -- Is there is an empirical basis for investors in general to expect outperformance in private equity in general?

Absolutely no way, at least not more so than in any other asset class. Investors in general should be shying away from active choices where they are not neccessary, minimizing costs, and saving more.

But that says more about investors in general than Private Equity. Let's talk about CalPERS. I included the quote from Ted because I think it's significant -- he thinks there's an opportunity there, and writes more checks than I do. Theoretically it's easier to believe that he has a shot at outperformance, but writing fewer checks would probably be a priority of some people if they were in the same seat. If you're really big or small (less than ~50MM), it's a funny asset class to use.

Those fortunate enough to be in special situations though -- say, successful entrepreneurs with expertise relevant to the strategy, or organizations with great networks of managers, or something -- could well be very thoughtful allocators to PE funds. The probability an organization that's special in this way hasn't already realized it is limited in my mind though.

Hope that clears things up! Cheers, and all the best --

Will