Private Equity Podcast: Fund Shack

Private Equity Evergreens–NAV Squeezing, Secondaries, Fee Alignment | with the AltView

The conversation between host Funshack and Tim McGillin of The AltView centers on the growing scrutiny of private‑equity evergreen vehicles, NAV‑squeezing tactics, secondary‑market dynamics, and fee alignment. McGillin, a former equity‑research analyst turned investment consultant, argues that the industry’s long‑held belief in superior private‑equity returns is increasingly unsupported by data, prompting a more skeptical, evidence‑based lens. McGillin cites Gary Gensler’s 2021 remarks and the work of French academic Ludovic Falipou, which show that typical private‑equity funds have delivered returns comparable to, or even below, public‑market benchmarks. He notes that median fund‑of‑funds have underperformed the S&P 500 from the 1980s through 2018, and that the industry’s historic 2‑4 % illiquidity‑premium expectation is eroding as recent vintages lag public equities. The discussion also highlights the difficulty of benchmarking private‑equity performance and the risk of relying on IRR‑centric metrics. Key examples include the claim that a 3 % excess return is needed to justify illiquidity and leverage, the observation that the worst 25 % of private‑equity funds drag overall results, and concerns that plan sponsors may retain poorly performing funds to avoid litigation. McGillin stresses that intermediaries value liquidity for reporting purposes, while end investors care primarily about final pension outcomes. The implications are clear: institutional fiduciaries must demand transparent performance measurement, tighter fee structures, and stronger accountability from managers. Evergreen structures and secondary‑market strategies should be evaluated against realistic benchmarks, and the purported illiquidity premium should be scrutinized to ensure it truly compensates investors rather than inflating manager fees.