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Shacking off the shackles

Private Equity Unchained, Thomas Meyer’s latest read, questions the very foundations of institutional investors’ thinking, says Ross Butler.

Nobody knows anything’ is a movie business saying, which also applies to private equity, according to Thomas Meyer, co-author of the highly-acclaimed

Beyond the J Curve, published in 2005. In his latest work, Private Equity Unchained, he sees private equity investment as a search for opportunities in uncertain, under-researched niches, and that the best opportunities are by definition unknowable in advance.

In this sense, raising a private equity fund is the ultimate marketing challenge – to put a glint on blind pools of pure hope. So, think about the people making fund investment decisions inside bureaucracies – they crave ‘unshakeable’ investment cases, based on ‘hard data’ to present to their superiors and clients. Add to that the fact that illiquid private equity decisions are effectively irreversible. If empirical and historical data is minimal, or even irrelevant, what exactly is the basis of investment decision-making?

Unlike most books of the genre, Meyer speaks directly to limited partners (LPs). This is not about ‘corporate finance’, so much as it is about private equity’s source code.

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