AllAboutAlpha.com notes an interesting study by Ludovic Phalippou of the University of Amsterdam , which is hardly shy about criticizing the industry. He notes three classes of fees, management fees, carried interest and miscellaneous fees--all of which can add up. Net of fees, the paper states, private equity funds underperform the S&P 500, and gross of fees, they outperform.

For some perspective, he calculates what a mutual fund would have to charge to generate comparable fees: 7 percent, which is massive.

So why do investors continue to invest? The author concludes that 1) there is fee confusion, which results in higher than expected fees and 2) there are misleading performance figures, which stem from a lack of reporting of negative IRRs for low multiples and overvaluing poorly performing investments among other things. For now, such critics are crying in the wind, but we may see some pensions step up their expertise.

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