Oxford Professor Questions Private Equity Return Metrics as CFOs Face Allocation Pressure

Oxford Professor Questions Private Equity Return Metrics as CFOs Face Allocation Pressure

Marc Rubinstein's latest Net Interest Extra podcast features Ludovic Phalippou, a Professor of Financial Economics at Oxford University's Saïd Business School, discussing measurement challenges in private equity returns—a conversation arriving as finance chiefs navigate record capital calls and performance scrutiny.

The February 3rd interview with Phalippou, who specializes in private equity and asset management, tackles the technical complexities of evaluating PE fund performance, an issue gaining urgency as institutional investors face pressure to justify allocations that have ballooned over the past decade. For CFOs at companies with pension obligations or treasury investment mandates, the question of whether reported PE returns accurately reflect risk-adjusted performance has moved from academic curiosity to fiduciary imperative.

Phalippou has built a reputation for forensic analysis of private equity economics, authoring research that challenges industry-reported metrics. His work focuses on the gap between headline internal rates of return and what investors actually earn after fees, timing effects, and risk adjustments. The interview, episode 17 of Rubinstein's series exploring finance topics with field experts, runs 50 minutes and is available to paid subscribers of Net Interest.

The timing matters. Private equity firms are raising capital at a moment when public market volatility has made alternative investments more attractive to institutional allocators, yet questions persist about whether PE's historical outperformance justifies its illiquidity premium and fee structures. CFOs managing corporate pension funds or evaluating strategic partnerships with PE-backed competitors need frameworks for evaluating these claims that go beyond marketing materials.

Rubinstein, whose Net Interest publication covers banking and asset management, has previously interviewed figures including Michael Green on passive investing trends (January 20th) and Huw van Steenis on private credit (August 2025). The Phalippou conversation fits a pattern of examining alternative asset classes through a skeptical, data-driven lens—the kind of analysis finance executives rarely get from sell-side research.

For corporate finance leaders, the practical question is whether their investment committees are asking the right questions about PE exposure. Phalippou's academic work suggests that common performance metrics can obscure the true cost of capital in private markets, a problem that compounds when boards compare PE returns to public equity benchmarks without adjusting for leverage, selection bias, or reporting lag.

The interview arrives as private equity's influence on corporate finance extends beyond investment portfolios. PE-backed competitors are reshaping industry economics, PE sponsors are driving M&A activity that affects public company valuations, and PE compensation structures are pulling finance talent from traditional corporate roles. Understanding how PE actually performs—not how it's marketed—has become table stakes for strategic planning.

What remains unclear is whether institutional investors will demand the methodological rigor Phalippou advocates, or whether the asset class's growth momentum will continue to override measurement concerns. For CFOs fielding questions from boards about alternative investment exposure, the podcast offers a rare chance to hear the academic case for skepticism articulated by someone who's spent years in the data.