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A discussion on the J-Curve in private equityp

8 Apr 2011

First-time investors in private equity funds are often introduced to the J-Curve effect. This is the circumstance when early interim valuations of a private equity portfolio decline relative to the capital the investor has contributed. This can create considerable angst. LPs become very concerned that they have somehow lost value over the time they have funded capital calls. Why does this sometimes happen? How should limited partners look at this? And, how can the J-Curve be reduced?

 

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