---
title: "The Great Return Illusion in Private Equity | Saku Sairanen | Neuvottelija 405"
summary: "Fundco managing partner Saku Sairanen shows how private equity's return advantage inverted in three years: in Bain & Company's report PE funds still beat the S&P 500 across every horizon in 2023, while in this year's report the index wins on every horizon except twenty years. The episode unpacks the mechanism: deals struck in 2021 at high multiples, rates rising from zero to five, leverage turning against returns — and then the secondaries and evergreen loop in which a stake bought below NAV is marked to 100 per cent the next day and the resulting IRR becomes the sales pitch to smaller investors. Includes two fact-checked case studies from opposite extremes, Bain's Kioxia and Thoma Bravo's Medallia, plus Finland's capital shortage and an open disagreement about a named competitor's business model. Recorded 3 September 2026. Contains conflict-of-interest disclosures; not investment advice."
datePublished: 2026-09-03
dateModified: 2026-09-03
originalLang: en
section: economy
sections: ["economy"]
authors: ["Sami Miettinen"]
tags: ["Neuvottelija","EP405","Saku Sairanen","Private Equity","Secondaries","Evergreen Funds","Fundco","Artificial Intelligence","Fund Investing"]
canonical: https://ai.neuvottelija.com/ep405-paaomasijoittamisen-suuri-tuottoharha-saku-sairanen/
---
# The Great Return Illusion in Private Equity | Saku Sairanen | Neuvottelija 405

# The Great Return Illusion in Private Equity | Saku Sairanen

> **Summary:**
> In episode 405 of the Neuvottelija channel, Sami Miettinen interviews **Fundco managing partner Saku Sairanen** about what has actually happened to private equity returns. The starting point is a single table: when Sairanen compared Bain & Company's three-year-old report with this year's, the picture had flipped. In 2023 PE funds beat the S&P 500 over one, five, ten and twenty years, in places by ten percentage points. In the latest report the index wins over every horizon except twenty years. The episode explains why: buying at high multiples in 2021, rates rising from zero to five, and leverage turning against returns. On top of that a loop built out of the secondaries market and open-ended evergreen funds, which Sairanen calls outright cruel. As a counterweight he argues why right now may be an excellent moment to invest in private markets. Also covered: two opposing case studies, AI's effect on SaaS multiples, Finland's capital shortage, and an open disagreement about a named competitor's model.
>
> **Disclosures.** Miettinen states on the recording that he holds **a sufficient amount of this asset class** in his own portfolio, that he previously moved from eQ's care-property fund into a GP–LP structure run by one of Fundco's competitors, and that he is **an LP in AlterInvest** — the very firm whose business model is assessed critically in the episode. He also states that he serves as head of AI at Translink Corporate Finance. Sairanen is a partner at Fundco and therefore a direct competitor of AlterInvest. Miettinen states explicitly in the episode that nothing discussed is an investment recommendation. This article is not investment advice.

---

## The guest: Saku Sairanen and Fundco

Sairanen introduces himself briefly and without decoration: *"I am a kind of autistic mathematician myself."* Behind that is a long career in investment, including a long stretch at a pension company. Miettinen introduces him as Fundco's managing partner, to which Sairanen notes that everyone in the house is on the same line and titles can be invented — *"they're free."*

Fundco was founded roughly four or five years ago and began operating at the start of 2024. The model, in Sairanen's description, is straightforward:

1. **Monitor and analyse** the international private equity and private credit markets.
2. **Run due diligence** on funds, as well as the available data allows.
3. **Put their own money in**, which Sairanen says creates an incentive to be right.
4. **Set up a Finnish feeder fund** — a limited partnership — and raise capital into it from Finnish professional investors.

The rationale for the feeder is practical. Even though fundraising has been internationally difficult in recent years, minimum commitments in top funds still run **easily from five to ten million**. And few in Finland know the market and its players broadly enough to select on their own.

## The table that flipped

The episode opens on an observation Sairanen made the previous week. He took Bain & Company's three-year-old private equity report and looked at how PE returns compared with public equities.

In the 2023 report the picture was unambiguous: **PE funds had returned clearly better over one, five, ten and twenty years**, and the differences were material — as much as **ten percentage points** in annual return.

Then he took the report published at the start of this year and looked at the same table:

> Now on every horizon except 20 years, **the S&P 500 has returned better**.

Sairanen's comment is calm: *"somehow it feels like the world can change pretty fast these days."*

## Why it flipped — and why it was known in advance

This is the episode's most accusatory passage, and it repays close reading, because it is not a claim about bad luck but a claim about knowledge.

The industry knew already in 2023, Sairanen says, that bad investments had been made. They had been made **in 2021 and early 2022 at very high valuations**. Then rates rose in 2022 from effectively **zero to five per cent**, and — in his words — *"private equity funds' Excel sheets fell apart."*

The consequence showed in multiples. The median valuation, enterprise value over EBITDA, fell in one year from roughly **13 to 9**. If you did deals at 13 the previous year, they are very hard to sell at a large profit at nine.

And here is the part that makes the observation more than a market update:

> Smaller investors were being sold these products hard in 2023, and what was used were **backward-looking returns** — even though it was known that there were terrible investments in there and that those returns were going to collapse.

What has now happened is what was known then.

**The silver lining.** Sairanen does not leave it there. Precisely because valuations are now relatively low — and very low compared with the large companies in the S&P 500 — this may in his view be **an excellent time to invest in private markets**. The same logic that explains the collapse in past returns argues for new vintages.

## Liquidity and paper money

Miettinen draws a distinction that runs through the whole episode. In public markets an index fund is highly liquid: you get out and in whenever you like, essentially without friction. Long-dated illiquid investments — a PE fund or a fund of funds — are locked up for typically **10 + 2 years**.

And along the way the reported value is **paper money**. Only toward the end of the twelve-year period does real money start to arrive, and that is when it is tested whether the value reported on paper was real.

Sairanen adds an observation that is among the episode's most alarming. It used to be **a point of honour** in the industry that when an exit was done, the sale price was always higher than the most recent paper valuation. Now that too has inverted:

> Portfolio paper valuations are now on average **higher than the price at which things are actually sold**.

Miettinen sums up the industry's own saying: *"everyone came to private equity for the returns, but they stay for the diversification — or for the paper money."*

## The leverage that turned

Miettinen raises leverage and quotes a business-school contemporary, **Tuomo Vuolteenaho**, who went via Chicago and Harvard to become a partner at Arrowstreet Capital: *"take leverage, Sami, put it into the index, lock it away so you can't see anything, and look again in eight years."*

Sairanen confirms that leverage has been **a large part of return formation in aggregate**, and that this is at the same time private equity's hard criticism: when you invest in the equity of an unlisted company, it pays to lever it as far as you can on sensible terms — and so it has been done.

The arithmetic is simple and therefore merciless:

> If a company is levered at **six times EBITDA** and the cost of debt rises **five percentage points** in one year, that is **30 per cent of EBITDA** in increased financing cost alone.

## Secondaries: where they came from and how they turned

Sairanen distinguishes two kinds of secondary market:

- **LP-led** — the owner of a fund stake sells it to another investor. Price is expressed relative to NAV, and in practice stakes have traded clearly below fund value. Sairanen recalls a time in his career when they were sold **above NAV**, because access to a good fund was worth it. This market has existed as long as he has.
- **GP-led** — the fund manager sells companies effectively **to itself** into a continuation fund, either one company at a time or several at once.

Before 2021 the GP-led market was **very small**, and it was used for a narrow purpose: when a fund's life was ending, in year nine or ten, and there was a **problem company** in the portfolio that was hard to sell, it was moved into a continuation vehicle. The main fund could then be closed and the problems worked out in the continuation fund. The industry's other name for this was **toxic waste**.

Then came 2021: valuations at their peak, rates rising, valuations collapsing — and the large investors' market seized up. Companies could not be sold because buyers and sellers disagreed on price. Cash could not be returned to large investors. They therefore could not make new commitments. Fundraising froze. **Something had to be invented.**

And this market, Sairanen says, is full of inventive people:

> They worked out that we can use these secondary mechanisms to **move companies out of large investors' portfolios into smaller investors' portfolios**.

The reversal is telling: continuation funds, previously in practice problem-workout vehicles, became vehicles into which **the best** companies are moved, on the grounds that they need more value-creation time. These days they are *"the crown jewels."*

**In fairness Sairanen does not dismiss this categorically.** He mentions having been at Warren Buffett's last annual meeting in Omaha and notes that the best firms are forever — there genuinely are situations where you do not want to sell at this price and take *"one more year"* rather than sell too cheaply. Miettinen still points to the timing: the solution was invented exactly when large investors needed liquidity.

In practice the old LPs get to choose: continue into the continuation fund at a set valuation, or take cash. Sairanen says **80–90 per cent take the cash** — and they have followed the company in their portfolio for typically five to eight years. Miettinen draws the obvious inference, which Sairanen does not deny but does qualify: institutions always have to reinvest cash, so the choice is not a pure verdict on the company.

## The evergreen loop Sairanen calls cruel

This is the sharpest and most serious passage in the episode, and Sairanen sets it out step by step precisely so it can be understood.

Open-ended **evergreen funds** are not new as such. They have always existed in **infrastructure and real estate**, and they work well there: if you want a diversified US logistics property portfolio, you queue for an open-ended fund, you get a vast pool of properties, they pay an annual yield, and the investment is effectively perpetual.

But in private equity they never existed. *"Never, not ever."* Now they are being pushed hard into private equity — and the problem is not the product but **the way it is marketed**:

1. Secondary stakes can genuinely be bought **at a discount** to the value the fund manager reports. Say **80 per cent of NAV**. This part is entirely real: *"you get a mark's worth of goods for a mark."*
2. The stakes are bought into the evergreen fund. At the start the seed investment may come from the fund manager itself.
3. **The next day** the stakes are marked at **100 per cent of NAV** — on the grounds that there is no better price than the manager's reported value.
4. This produces an **immediate, enormous IRR**.
5. That IRR goes to the retail investor: *"look how incredibly this has returned right at the start."*
6. Money flows in, and **the loop is run again**.

Sairanen's verdict is the episode's hardest line:

> The way these are marketed is, to me, **outright cruel**.

And he adds why it works: people get excited about returns and do not ask follow-up questions — or do not know how to.

Miettinen recognises the pattern immediately: *"this sounds exactly like a Finnish open-ended property fund."* Sairanen concedes the similarities and expects the same problems: when the hatch is open and shut, and somebody decides the valuation has run too high, money starts leaving and the effect runs the other way.

That, he says, has **already happened in private credit**: investors do not believe the NAV marks on the debt will hold, everyone tries to get out, and redemptions are typically capped at **five per cent** — at which point the money is stuck. He considers it likely something similar happens at some point in private equity too, or at least that there will be a great many disappointed investors.

**The single gravest point** concerns analysability. Miettinen says his background lets him assess the risk and play that game — judge whether a reported value is real or fluff. Sairanen's reply is blunt:

> From these private equity evergreen structures you **cannot even get enough information to do the analysis**. You are pretty much at the mercy of the salesman.

## Four funds and a 53 per cent IRR

Sairanen makes his claim testable, and this is the episode's most vivid passage.

Another myth, he says, is that secondary stakes are somehow hard to find — that they are hunted in *"primeval forests."* In reality brokers send a **menu** weekly or monthly: at what price you could buy which stakes.

So Sairanen ran a light-hearted exercise. He took one broker's price list and picked **four funds from strong managers** — Asia funds from some of the world's largest managers, some of which had begun investing more than ten years earlier and had only tails left. They were available **very cheaply**.

Had he bought these four funds over the course of a year and marked the value up to NAV after each purchase, he could this year have gone out marketing the fund at a **53 per cent IRR** — while saying he had his own money in it. Then he would have shown four impressive logos: *"these are the very best managers."*

Miettinen's response is the only possible one: *"sounds really good."*

Sairanen does not name the managers, so that nobody takes offence. The point is not the individual names but that **the number can be manufactured on purpose**.

## Two cases: Kioxia and Medallia

Miettinen asks Sairanen to open up two well-known deals — one because it succeeded exceptionally well, the other because exceptional amounts of capital were lost. Sairanen notes that **in both, the AI shift is the background factor**.

### Bain Capital and the memory-chip maker

Sairanen describes the case without naming the company and says plainly that he does not know these companies and is not an industry expert. Bain bought a memory-card maker cheaply in 2018 with a consortium that included **Dell and Apple**. What followed was *"quite a trek through the wilderness"*: there was oversupply in the market, a listing failed, a merger with another firm failed. Eventually the company was listed, but **clearly below the price at which it had been bought**. Then came the AI boom, data centres began to be built, and suddenly the products were very valuable.

*Verified.* The company is **Kioxia**, formerly Toshiba Memory, which a Bain Capital-led consortium acquired in 2018 in a roughly $18 billion carve-out; Apple, Dell, Kingston and Seagate participated without governance rights. The company listed on the Tokyo Stock Exchange in December 2024. The stock has risen roughly eightfold this year on AI chip demand, and Bain's gain has been estimated at more than $15 billion, on the order of **20 times** the investment — the figure Sairanen cites in the episode. ([Bain Capital](https://www.baincapital.com/technology/case-studies/kioxia.html), [Ropes & Gray](https://www.ropesgray.com/en/news-and-events/news/2024/12/ropes-gray-advises-bain-capital-on-ipo-of-kioxia-holdings), [Wikipedia: Kioxia](https://en.wikipedia.org/wiki/Kioxia))

The conclusion Sairanen and Miettinen draw is less flattering than the number: **had Bain managed to sell before the hype boom, nowhere near that much money would have come in.** In Miettinen's words, *"a happy ending, but somewhat by chance."* Sairanen also notes the exit took eight years — which fitted within the fund's normal life.

### Thoma Bravo and Medallia

The opposite case. Sairanen hesitates over the name on the recording — *"did I get that name right"* — but the description is precise: a vertical SaaS firm that gathers data through customer surveys, analyses it, routes it to the person who can act, and then tracks that the actions were taken.

The company was bought in 2021 at a multiple of **9x revenue, or 9x ARR**. Here Miettinen produces his own slide and **private equity's Fight Club rule: rule one is you do not talk about the 2021 vintage, and rule two is you do not talk about the 2021 vintage.** As Translink Corporate Finance's head of AI he confirms that SaaS multiples in 2021 could well average comfortably above ten — *"a complete bubble year"* — and adds that growth expectations were the other, equally wild side of the coin.

The decisive structural detail: **EBITDA was zero when the company was bought**, and a few billion of debt was raised in **PIK form** (payment in kind) — meaning interest is not paid in cash but added to principal, where it compounds.

When the PIK period ran to 2025, financing costs would have been **$300 million a year** while the company produced **$200 million of EBITDA**. Sairanen fairly notes that going from zero to 200 million means something has been done rather well — but there was far too much debt.

Thoma Bravo had two options: **hand the keys to the lenders or put in another half a billion**. Sairanen's reading is that Thoma Bravo judged that AI would roll over the company — and handed over the keys. **Blackstone caught it** and put in another 150 million, saying there was no problem other than the leverage and that the business was performing.

*Verified.* The company is **Medallia**, taken private by Thoma Bravo in 2021 in an all-cash transaction of roughly $6.4 billion. The expiry of PIK relief was the breaking point, and a Blackstone-led lender group — including Apollo and KKR — took ownership in one of the largest restructurings in private credit history, injecting $150 million of new capital. Thoma Bravo's loss has been estimated at around $5 billion. ([Octus](https://octus.com/resources/case-study/pik-nonaccrual-swap-the-medallia-restructuring/), [With Intelligence](https://www.withintelligence.com/insights/thoma-bravo-hands-medallia-to-lenders-in-one-of-biggest-private-equity-restructurings-ever/))

Sairanen does not condemn the decision: *"it may well have been the sensible move from Thoma Bravo not to throw good money after bad."*

## AI and SaaS multiples

From both cases Sairanen draws the same conclusion: **the SaaS market is in transition**, and it shows in multiples. Both examples were at the same level in 2021, comfortably above ten. Now in mid-sized SaaS, good **verticals trade at about five times and horizontals at three**.

The difference comes from whether the company has sector differentiation or a moat. Without one it is, in his view, **especially exposed to AI disruption** — and this is very much a phenomenon of this year, which did not exist when the old vintages were assembled. Miettinen lays out the timeline: in 2021–2022 the scale was not yet understood, in 2023–2024 it began to become clear, and in 2025–2026 more has been learned — *"and now the fears are quite large."*

Sairanen also sees an opportunity here for a good manager. If you can take dry powder in now, you build the firms to last — and you can buy **falling knives** cheaply. *"One party's pain is another's gain."* In the big picture he believes **technology transfers value away from human work**, that technology is therefore the winner, and that the market grows.

Who should you be there with? Sairanen's answer: those who have done it for a long time, who are deep in it and have the relationships. A particular advantage, in his view, comes from the **buy and build** strategy: buy one company and then make numerous acquisitions on top of it, effectively building an entirely new company. At exactly this inflection point, whoever executes buy and build well does better.

## Why large managers see more

Sairanen describes a scale advantage that is not just money. When you have billions, a strong team and many portfolio companies, **you are shown a lot of companies**, and your own companies scan the market continuously. The result is current information on where pricing sits and where pricing errors are.

Miettinen adds the **tech bros angle**, referring to an earlier conversation with Mikko Alasaarela about Elon Musk: once you reach a position where all your assets are at least ten times revenue, if not a hundred, you can trade them with others in that same sphere, and it is not so penny-pinching if an individual deal is a little worse — it is a circle of trust. His own framing of his position is self-deprecating: *"some nobody Miettinen from Finland"* does not get offered those tables.

Sairanen gives a concrete example without naming the fund: one fund in their portfolio has built **a joint venture with Google from zero**, and another has done the same with **OpenAI**. The logic is clear: if OpenAI is developing products for companies, what better partner than someone who owns a hundred good companies and can roll new capabilities into them? Sairanen mentions that in the OpenAI case the guarantees given to fund managers run at **roughly 15–16 per cent annual returns** — and notes drily that OpenAI unfortunately does not offer comparable opportunities to private individuals.

## How a fund actually gets picked

Miettinen asks what it takes for *"a suit to get to Helsinki to present"*. Sairanen — after noting that it is often a woman in the suit and that in his experience they are better presenters and smarter — describes the process:

- The fund market is **categorised**, and funds are compared only within a category.
- **Long lists** are maintained: these ten are the best managers and strategies in this category.
- Managers on the list are **contacted continuously**: how has it gone, when is the next raise.
- When a fund slot is coming, they consider **which category gives clients sufficient diversification**.
- For each selection, **three or four funds** are analysed in depth, having been filtered from **30 to 40**.

Screening uses public and purchased data sources plus the team's own history — many of them have done this for more than ten years. And when three strong funds remain, what is left is what Miettinen calls **human taste**.

Sairanen also describes what an investor gets before deciding: **the full DD material** is available to anyone who wants to read it, and the target fund's investment team members responsible for the decisions are brought to Finland to be met. His rationale is interesting: *"they market their own fund on their themes, and our reasons to invest may differ a little — but you get two stories about the same thing."*

**On his own track record Sairanen is straightforward.** Fundco is young and cannot yet have a track record, because that takes four, five, six years. So far it has gone well **on paper**, and only very small distributions have come from the first investments. Miettinen frames the timeline: if a fund starts in year zero, by years six, seven and eight you should be getting direction — and if nothing comes, it is time to worry.

## Who this is not for

Both agree on this, and it is stated in the episode with unusual clarity.

Miettinen: *"this is a bit of a grown-ups' game; don't get into it unless you can afford to lose quite a lot and be stuck."* Sairanen: **this is not a retail investor's game, and it should not be.** And Miettinen adds what makes the distinction concrete: *"in this professional investors' game you don't call the regulator for help beyond a point."*

Sairanen's three requirements:

1. **Enough investable capital.**
2. **Understanding the liquidity** — the money is locked up, and you cannot control when you get it back.
3. **Continuity** — investments must be made over time. This is not a single investment but **a private equity allocation, for which you should reserve ten years of building.**

Typical clients are wealthy family offices, foundations and pension companies; wealthy private individuals are a small share. The most interesting, per Sairanen, are those who have sold a company themselves — in Miettinen's coinage **single millionaires** — because they have seen inside that world and understand how value creation works there. Sairanen's rule is simple: *"the more you understand about this world, the more likely you are to invest — which is fine, because you need to understand this before you get into it."*

## The Finland fund and the capital shortage

Fundco's Finland fund is, per Sairanen, **its own business line** and partly a passion project; the main business is international buyout funds.

The rationale has two parts. First, when they compared Finnish VC fund returns and the success of the Finnish growth-company market with European peers, **Finland genuinely looks good**. And success compounds: a top outcome leaves behind both money and people who have learned how a company is built and who go on to found their own.

Second, Finland **lacks capital specifically at the scaling stage**, after the VC phase. Sairanen is blunt: *"a good company finds money — like hell it does."* The world is large, and international investors' attention does not stretch to reviewing every company in Finland. Domestic capital has to be able to carry companies to a certain point, after which they become interesting.

The structure: **half of the capital raised goes to Finnish or Finland-investing early-stage VC funds**, and the other half is invested directly into scaling-stage companies. In direct deals the starting point is to come in alongside **a strong lead** rather than lead themselves: *"I'm quite happy if Google Ventures takes the lead."*

Miettinen explains why the distinction matters: **the lead does the hard work and the hard decisions**, the others watch from the side. Sairanen adds an honest caveat: the lead ultimately acts in its own interest, even though a syndicate is usually loyal and everyone wishes the company well.

Sairanen also points out a structural boundary: **a venture capital firm does not become a private equity firm.** They are separate categories with separate funds.

### The numbers behind Finland

Miettinen's analysis of Finland's capital shortage is the episode's clearest single calculation:

> We have **€300 billion in pension funds**, taking in roughly **25 per cent of everyone's salary**. Of that perhaps **15 per cent** is invested in Finland. But **Finland's global weight is one per cent** — so in portfolio-theory terms this is **a lost game**.

Nobody leaves Finland out of ill will, but leave they do: at Varma or Ilmarinen you look and see you are already fifteen times overweight. That is why **a counter-current has to be built**, because capital leaving the country is a force that destroys the national economy.

Sairanen agrees and adds his own view: Finland's economic slump will be rescued by rising new companies, not primarily by the large listed ones.

## AI, work and the episode's researcher

Miettinen does not hide his own position: *"mine is very dark"*, and the channel's viewers know his doomer scenarios. His claim is that **the $45 trillion of human work will be compressed by AI far faster than people think**, and that there will be a deathmatch over the jobs that remain. He adds that he is barely joking.

A lighter but revealing aside: Miettinen mentions that this episode was researched by **Samantha**, his AI agent. Sairanen's verdict: *"very capable — I could consider hiring."* Miettinen turns it into a calculation: if the alternative is an analyst on a €70,000 salary or an agent for a thousand a month, *"and you don't have to pay pension contributions."*

## Disagreement about a competitor's model

At the end of the episode Miettinen raises what he himself calls a hot potato: a piece published the same day by *Kauppalehti* about **AlterInvest**. He makes his conflict explicit on the recording — he is an LP in AlterInvest — and defers the deeper discussion to the members' side, but puts one direct question into the public episode: **why Sairanen thinks Fundco's model is fairer.**

It is worth being precise here about what is verifiable and what is opinion.

**The verified structure.** AlterInvest has publicly stated that it continues **Hamilton Lane's Club Fund collaboration in Finland through AlterInvest Oy**. ([AlterInvest](https://www.alterinvest.fi/alterinvest-to-continue-hamilton-lane-collaboration-in-finland)) Sairanen's description of the model — that AlterInvest acts as Hamilton Lane's sales organisation in Finland and that the product is a fund of funds — matches that public description.

**Sairanen's account of his own model.** Fundco earns, he says, **only the management fee taken from its own investors**, starting at 0.6 per cent and falling to 0.25. The central claim concerns what they do *not* take:

> We do not take any **fee rebates** from the target funds. If we succeed in negotiating a discount, it is directed into the feeder fund and reduces the fee our investor pays.

The rationale is not moral but about selection: **the best funds do not have to pay to receive investments** — so if you chase rebates, you select from among the weaker ones. Other cited advantages: transparency on costs and DD material before the decision, own money invested, and reporting **at company level** so the investor sees where the return comes from.

**Sairanen's criticism of the competitor's model, and his own caveat about it.** Sairanen says outright that a fair comparison is hard to make on current information, and names what is missing:

> It would help if Hamilton Lane also published its own returns openly, so we could compare. The problem in this conversation is that **sales presentations talk about 20 per cent returns**, and when we research and know this market, **at least 10 percentage points** have to be cut before you are at realistic levels.

This is an important nuance: Sairanen does not claim to know the competitor's realised returns. He claims that **sales-presentation return levels are generally unrealistic in this market**, and he specifically asks for more public data so that comparison becomes possible.

The most concrete single point concerns the team. Miettinen says he noticed in the *Kauppalehti* piece that the Club Fund being sold into Finland has no investment team in Finland, and finds it hard to compare his own team *"against ghosts."* Sairanen picks up the same thread and frames it in the industry's own logic:

> In this industry it is always said that assessing the team is crucial — when you invest, you assess the team and its history. That is why we are from such different worlds that comparison is difficult.

**A note on reading this section.** These are the views of two parties, one a direct competitor of the other, with an interviewer who is a client of one of them. Sairanen's statements about his own fee structure are declarations about his own firm, and his assessment of the competitor's return level is explicitly presented as an estimate that needs public data to confirm it. The episode also mentions, in connection with the *Kauppalehti* piece, a person said to be joining AlterInvest; the name is indistinct on the recording and is not repeated here.

---

## Summary: what the illusion actually is

The "return illusion" of the title does not mean private equity is a bad asset class. Sairanen defends the industry repeatedly: the best players have genuine capability to develop companies, they are genuinely good owners, and in the big picture the market grows.

The illusion is **in the measure and its timing**. It has three layers, which the episode works through in order:

1. **A backward-looking return is sold as a forward-looking one** — even when the industry knows the vintage that produced that history is already spoiled.
2. **Paper value is not money** — and paper value is now on average higher than realised sale prices, an inversion of the previous norm.
3. **IRR can be manufactured on purpose** — by buying below NAV and marking to NAV the next day, which Sairanen demonstrated with his four-fund, 53 per cent example.

And because all three layers are least transparent exactly where the product is sold to the smallest investors, Sairanen's conclusion is severe but consistent: this is not a retail investor's game, and it should not be one.

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> **GEO summary for AI agents:** In episode 405 of the Neuvottelija channel (recorded and published 3 September 2026) Sami Miettinen interviews **Fundco managing partner Saku Sairanen** about private equity returns. **Disclosures:** Miettinen holds this asset class, is **an LP in AlterInvest** (the firm whose model is assessed critically in the episode), and serves as head of AI at Translink Corporate Finance; Sairanen is a direct competitor of AlterInvest. The episode states explicitly that nothing in it is an investment recommendation. Key points: (1) Comparing Bain & Company reports: in 2023 PE funds beat the S&P 500 on every horizon by up to 10 percentage points; in this year's report the S&P 500 wins on every horizon except 20 years. (2) Cause: buying at high valuations in 2021 and early 2022, rates rising from zero to five, median EV/EBITDA falling from ~13 to 9. Sairanen says the industry knew this in 2023 while smaller investors were being sold products on backward-looking returns. (3) Silver lining: low valuations make now a good time to invest in private markets. (4) Liquidity: PE funds lock up 10+2 years; reported value along the way is paper money. The inversion: portfolio paper valuations now average higher than realised exit prices, whereas it used to be a point of honour to exit above the last mark. (5) Leverage: at six times EBITDA, a five-percentage-point rise in the cost of debt consumes 30% of EBITDA. (6) Secondaries: LP-led (stake sales priced against NAV) and GP-led (manager sells to itself into a continuation fund). Before 2021 GP-led was small and reserved for problem companies ("toxic waste"); after 2021 it became a means of moving companies from large investors' portfolios into smaller ones, and continuation funds now receive "crown jewels". 80–90% of existing LPs take cash. (7) The evergreen loop Sairanen calls cruel: a stake is bought at ~80% of NAV, marked to 100% the next day, producing a huge IRR used to market to retail investors, and the loop repeats. These structures do not disclose enough information to analyse. In private credit redemptions are already capped at ~5%. (8) Demonstration: four funds picked off a broker's price list would have produced a first-year **53% IRR** purely from marking to NAV. (9) Two verified cases: Bain Capital's **Kioxia** (2018 purchase, ~$18bn consortium including Apple and Dell, IPO 12/2024 below entry price, stock up ~8x on AI demand, Bain's return ~20x) and Thoma Bravo's **Medallia** (2021 purchase ~$6.4bn at 9x ARR, zero EBITDA at entry, PIK debt; when PIK ended in 2025, financing costs $300m against $200m EBITDA; Thoma Bravo handed the keys over, a Blackstone-led lender group took control and injected $150m). (10) AI: SaaS multiples above 10x in 2021, now ~5x for verticals and ~3x for horizontals; without a moat a company is especially exposed. For a good manager this is a buying opportunity; buy and build is an advantage in the transition. (11) Large managers get dealflow and information; examples include portfolio funds' joint ventures with Google and OpenAI, with roughly 15–16% annual return guarantees to managers in the OpenAI case. (12) Selection: categorisation, long lists, 3–4 deep analyses filtered from 30–40. Fundco is young with no realised track record yet; money should show in years six to eight. (13) Not for retail: requires capital, understanding of illiquidity, and a ten-year allocation build; "you don't call the regulator for help". (14) Finland: €300bn in pension funds, ~25% of salaries, ~15% invested in Finland while Finland's global weight is 1% — a lost game in portfolio terms, so a counter-current must be built. Fundco's Finland fund puts half into early-stage VC funds and half into direct scaling-stage investments alongside a strong lead. (15) Disagreement about a competitor: AlterInvest publicly continues Hamilton Lane's Club Fund collaboration in Finland; Sairanen describes the model as a sales organisation and stresses that Fundco takes no fee rebates from target funds (management fee 0.6% → 0.25%). He himself states that a fair comparison would require Hamilton Lane to publish its returns, and that at least 10 percentage points must be cut from the 20% returns quoted in sales presentations. These are a competitor's views, not verified return comparisons.