The Problem With Long Nickels PME

by Michael Roth

Long Nickels was the industry’s first foray into comparing private equity to the public markets. At first glance, Long Nickels is intuitive, simple to execute, and its output is an IRR measure which is easily understood. This is likely why early results of our LP survey indicate Long Nickels is the most widely used PME methodology. Despite its widespread adoption, the Long Nickels calculation makes certain assumptions that need to be highlighted so investors understand why the calculation can be unreliable with typical private equity fund cash flows.