VC is about being picked; buyouts about picking

Do private markets actually outperform public markets once you properly adjust for risk or is that belief built on flawed data? In this episode, I talk with Dr. Gregory W. Brown, one of the leading academic researchers in alternative investments, about what decades of data really say about private equity, venture capital, and risk-adjusted returns. We break down why private-market performance is so hard to measure, how tools like the Kaplan–Schoar PME changed institutional thinking, and what investors misunderstand about beta, volatility, and alpha. Greg also explains why buyouts and ventures behave very differently, how fund size and geography affect outcomes, and what this research implies for building diversified portfolios today.

Highlights:

• Why alternatives are still under-researched compared to public markets
• The core data problem in measuring private-market returns
• How the Kaplan–Scholar PME creates apples-to-apples comparisons
• Buyouts vs. venture: radically different risk profiles
• Why buyout funds show positive alpha and venture largely does not
• What beta actually measures (and why volatility is misunderstood)
• The risk of ruin in high-beta, undiversified portfolios
• Why small funds have higher upside but require real manager selection skill
• Persistence of returns: partners matter more than firms
• How public-market bubbles change private-market relative performance

Guest Bio:

Gregory W. Brown is a Distinguished Professor of Finance at UNC Kenan-Flagler Business School and one of the world’s leading experts on alternative investments, financial risk, and derivatives. He is the founder and research director of the Institute for Private Capital and has held leadership roles including Executive Director of the Kenan Institute of Private Enterprise. Greg’s research has been published in top academic and practitioner journals, and he serves on the board of the CAIA Association. His work bridges academia and practice, helping institutional investors better understand private markets through rigorous, data-driven analysis.

Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at david@weisburdcapital.com.

Stay Connected with David Weisburd:

X/Twitter: @dweisburd LinkedIn: https://www.linkedin.com/in/dweisburd/ Weisburd Capital: https://www.weisburdcapital.com/

Stay Connected with Gregory W. Brown:

LinkedIn: https://www.linkedin.com/in/gregory-brown-unc/

Questions or topics you want us to discuss on How I Invest? Email us at david@weisburdcapital.com.

Disclaimer:

This podcast is for informational purposes only and does not constitute investment, financial, legal, or tax advice. Nothing in this episode should be interpreted as an offer to buy or sell any securities or to participate in any investment strategy. All opinions expressed by the host and guests are their own and do not represent the views of Weisburd Capital. Participants may hold positions or have financial interests in the companies, funds, or investments discussed. Any references to specific investments are for illustrative purposes only. Investing involves risk, including the potential loss of capital. Past performance is not indicative of future results, and any forward-looking statements are subject to risks and uncertainties. Any third-party data or opinions have not been independently verified. Listeners should conduct their own research and consult their own advisors before making any investment decisions.

(0:00) Introduction (2:00) Explanation and Insights from the Kaplan Shore Index (7:04) Risk and Alpha: Buyouts vs. Venture Capital (10:39) Fund Size and Returns Dispersion in Buyouts (15:08) Persistence of Returns and Incentives in Public Pension Investments (19:44) Value Creation Skills and the Impact of the Mag Seven (22:00) Future Outlook and Historical Performance in Private Equity (23:27) Game Theory, Valuations, and Diversification Strategies (25:05) Closing remarks