All Else Equal: Making Better Decisions
Ep34 “Why Has Private Equity Grown So Much?” with Eric Zinterhofer
Nov 1, 2023
Eric Zinterhofer, Founder of Searchlight Capital Partners, joins the hosts to discuss the tradeoff between Public Equity and Private Equity. They explore the advantages and drawbacks of private equity funds, the challenges of performance measurement, and the time commitment required for private equity investors. They also discuss the factors driving the growth of private equity and the importance of alignment.
29:15
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Quick takeaways
- Private equity offers the potential for higher returns through focused monitoring and better management, but at the cost of higher risks and lack of diversification.
- The increasing trend of private equity firms taking share from public markets is driven by factors such as the unattractiveness of being a public company for smaller firms, the evolution of private equity towards long-term value creation, and the high costs and regulatory burdens of being public.
Deep dives
Tradeoffs between Publicly Traded and Privately Held Firms
The podcast episode explores the tradeoffs between publicly traded firms and privately held firms. Publicly traded firms offer diversification and lower risk for investors, but they lack incentives for monitoring and effective management. On the other hand, privately held firms allow for more focused monitoring and better management, but they lack diversification and pose higher risks for owners. The episode discusses the advantages and disadvantages of each ownership structure and how private equity funds have emerged as a solution that combines the benefits of both.
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