Oxford Professor Questions Private Equity Return Metrics as Asset Class Faces Scrutiny

Oxford Professor Questions Private Equity Return Metrics as Asset Class Faces Scrutiny

Ludovic Phalippou, a professor of financial economics at Oxford University's Saïd Business School, sat down with finance writer Marc Rubinstein this month to discuss his research on private equity performance measurement—a conversation that arrives as CFOs and institutional investors grapple with how to evaluate an asset class that now manages trillions in corporate capital.

The interview, published February 3rd as part of Rubinstein's Net Interest Extra podcast series, focuses on Phalippou's specialty: the methodologies used to calculate private equity returns and how those metrics shape investment decisions. For finance leaders allocating capital to PE funds or considering take-private offers, the technical details of return measurement aren't academic—they're the difference between understanding what you're actually paying for and taking the pitch deck at face value.

Phalippou has built his academic career on examining the private equity industry's performance claims, authoring a book on the subject and publishing research that challenges conventional wisdom about the asset class's outperformance. His work at Oxford's Saïd Business School has made him one of the more frequently cited skeptics of PE return calculations, particularly around issues like selection bias in reported data and the timing of cash flows that can flatter internal rate of return figures.

The timing of this conversation matters. Private equity firms have spent the past eighteen months navigating a difficult exit environment, with IPO markets largely frozen and corporate buyers cautious. That's left many funds holding assets longer than planned—which affects the very return calculations Phalippou studies. When distributions slow and capital stays locked up, the math changes, and CFOs sitting on allocation committees need to understand how.

Rubinstein, who writes the Net Interest newsletter covering finance and banking, has made these deep-dive conversations with industry experts a regular feature. Previous episodes have tackled passive investing dynamics, blockchain infrastructure, and private credit—all topics where the technical details matter enormously to how finance leaders deploy capital.

The full 50-minute conversation is available only to paid subscribers of Net Interest, following the podcast's paywall model for extended interviews. For CFOs whose firms have capital committed to private equity funds, or who field regular pitches from PE firms looking to acquire their companies, Phalippou's perspective offers a useful counterweight to the industry's own marketing materials.

The core question Phalippou has spent years examining—whether private equity actually delivers the risk-adjusted returns it claims—remains unresolved in academic literature, largely because the data is proprietary and self-reported. That opacity is precisely what makes conversations like this one valuable: they force finance leaders to ask harder questions about what they're measuring and whether the metrics they're using actually capture what they think they do.