
All Else Equal: Making Better Decisions Rerun: Ep63 “What Explains the Growth of Private Equity? A Different Perspective” with Ludovic Phalippou
Nov 26, 2025
In this engaging discussion, Ludovic Phalippou, a professor of financial economics and author of Private Equity Laid Bare, delves into the rise of private equity. He explores why private markets attract long-term investors, highlighting the balance between complexity and high fees. Phalippou challenges misconceptions about superior returns and discusses the hidden costs in private equity, urging transparency. He also shares insights on the role of mega asset owners and the evolving landscape of investment performance, making a compelling case for understanding this dynamic sector.
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Private Ownership Versus Public Diversification
- Private ownership trades off monitoring and idiosyncratic risk versus public diversification and weak oversight.
- Private equity can potentially solve that trade-off by providing concentrated monitoring while investors obtain diversification via the fund.
Private Markets Fit Long-Term Capital Suppliers
- Many institutional suppliers (endowments, pensions) don't need millisecond liquidity and can accept private-market structures.
- Private markets often offer better diversification and alignment of management incentives for turnaround or long-hold strategies.
Mega Asset Owners Change The Trade-Off
- The rise of mega asset owners (sovereign wealth, large pension funds) enables direct holding of thousands of companies.
- This reduces the textbook trade-off and creates a third route between concentrated private owners and diffuse public shareholders.


