One of the ways that investors seek status through their investments is to buy into private equity.  As an added inducement, a technical detail in how private equity returns are calculated makes these investments seem better than they are.  So, private fund managers get to boast returns that their investors don’t get. Private Equity Overview In a typical arrangement, an investor commits a certain amount of capital, say one million dollars, over a period of time.  However, the fund manager doesn’t “call” all this capital at once.  The investor might provide, say, $100,000 up front, and then wait for more of this capital to be called. Over the succeeding years of the contract, the fund manager will call for more capital, and may or may not call the full million dollars.  Finally, the fund manager will distribute returns to the investor, possibly spread over time. An Example Suppose an investor is asked to commit one million dollars, and the fund manager calls $100...