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

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

Oxford University's Ludovic Phalippou sat down with financial analyst Marc Rubinstein this month to dissect one of the thorniest questions facing institutional investors: whether private equity funds actually deliver the returns they claim.

The interview, published February 3rd on Rubinstein's Net Interest newsletter, comes as CFOs and finance chiefs increasingly question the fees and performance metrics of an asset class that has consumed trillions in institutional capital. Phalippou, a Professor of Financial Economics at Oxford's Saïd Business School who specializes in private equity and asset management, has built a career examining the gap between private equity's marketing materials and its actual performance.

The timing is notable. As public market valuations have compressed and interest rates remain elevated compared to the zero-rate era, the premium that private equity commands—both in fees and in the illiquidity investors must accept—faces harder questions. For corporate treasurers and pension fund managers, the conversation matters because it directly affects capital allocation decisions that can span decades.

Phalippou's work has consistently challenged the industry's preferred narratives. His research focuses on how private equity returns are measured and reported, a technical but consequential question. The standard metrics—internal rate of return, multiples on invested capital—can obscure rather than illuminate actual performance, particularly when compared to public market alternatives that don't charge 2-and-20 fee structures.

The interview format allows Phalippou to walk through these measurement challenges in detail, the kind of granular discussion that rarely makes it into LP reports but directly affects whether private equity allocations make sense for a given institution. For finance leaders evaluating whether to commit capital to private funds, or whether existing allocations justify their cost, the conversation offers a framework for asking better questions of general partners.

Rubinstein, who has built a following among institutional investors for his detailed financial analysis, has made these expert interviews a regular feature. Previous episodes have covered topics from passive investing dynamics to blockchain infrastructure, consistently attracting finance professionals looking for substantive analysis beyond the usual conference circuit talking points.

The podcast runs just over 50 minutes, suggesting a detailed technical discussion rather than surface-level commentary. That length is itself revealing—properly explaining private equity return measurement requires walking through the mechanics of cash flows, timing, and benchmark selection, none of which lends itself to soundbites.

For CFOs considering private equity allocations, the core question Phalippou's work raises is uncomfortable: if the measurement methodologies themselves are contested, how can fiduciaries make informed decisions? The interview doesn't appear to offer easy answers, but it does provide the technical foundation for asking better questions—which, in an asset class as opaque as private equity, may be the more valuable contribution.