Private equity is estimated to be less than 2% of all assets managed internationally. It is – at least in theory – an inherently contrarian asset class. But being countercyclical and contrarian is difficult. For illustration, a few days ago I read an article that predicted the ‘denominator effect’ to return. The news was dated April 1st, so I may have been falling for an April Fool’s Day prank. You sense that I have my reservations about the denominator effect – I see it as the blind application of a flawed rule that, in essence, compares apples with oranges. However, it has a strong and ultimately detrimental effect on portfolio management.
Image: http://blog.dealmarket.com
