This fight against transparency, it’s worth noting, coincides with a series of S.E.C. enforcement actions against private equity firms. Stated simply, these cases prove that investors need more, not less, information about what their managers are up to. “Just when they lift the hood on private equity and find some mechanical problems, they want to slam it shut again,” said Jennifer Taub, a professor at Vermont Law School. “Having a whole big pot of money in the shadows is not a good idea if you’re trying to prevent systemic risk.” The attempts to keep private equity practices under wraps also coincide with a decline in the industry’s investment returns. An analysis published in late June by the Center for Economic and Policy Research notes that private equity’s performance in recent years is about even with that of the overall stock market. That means investors are not receiving appropriate rewards for the additional risks they take in these funds.
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