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Oxford Saïd research cited in new policy to govern private funds

Published

The Securities and Exchange Commission (SEC) has cited research from Ludovic Phalippou in a recently proposed policy to govern private funds.

The policy sets out new rules which would prevent private fund advisers from engaging in certain sales practices, conflicts of interest, and compensation schemes that are contrary to the public interest and the protection of investors.

The SEC has drawn on several of Professor Ludovic Phalippou’s research outputs to justify a number of these new rules. Included is a 2007 article published in Harvard Business Review on ‘the truth about private equity performance’, which discussed research showing that private equity fund performance is often reported in a way that exaggerates the truth. The full research study, which was published two years later in The Review of Financial Studies, is also cited.

‘The SEC has just made an unprecedented effort to review private market funds. I hope that this proposal will be fully implemented.’

Ludovic Phalippou

Professor of Financial Economics

Also mentioned is Ludovic’s study of leveraged buyout transactions, which was published in the Journal of Financial Economics in 2018. The paper found that private equity firms charged hidden fees amounting to $20 billion to companies, boosting their own profits at the expense of end investors. Discussing his research with the University of Oxford in 2015, Ludovic called on the SEC to ‘review their current approach’ to private equity regulation, if the actions uncovered by his research were deemed to be illegal.

The SEC has also drawn on a working paper assessing the fees charged by general partners in the private equity industry. Ludovic debated the findings of this paper, entitled ‘An Inconvenient Fact: Private Equity Returns and the Billionaire Factory’ with David T Robinson, Professor of Finance at Duke University in 2020.

Ludovic, who has openly criticised current private equity practices, welcomes the SEC policy proposal. Commenting on the publication, he said: ‘The SEC has just made an unprecedented effort to review private market funds. I hope that this proposal will be fully implemented.’

Read more about Ludovic’s research on his Oxford Saïd profile.

Read the SEC’s proposed private fund governance policy.