Pension Funds Only Guess at Private Equity's Cost

Partnership agreements outlining private equity firms’ practices are as closely guarded as the recipe for Coca-Cola.

Indeed, when it comes to secrecy, few industries do it better than private equity. To outsiders, the lucrative business of borrowing money, buying companies and hoping to sell them later at a profit is as impenetrable as a lockbox. Rates of return and hidden costs are difficult to identify, even for investors in these deals.