Many people including the media conflate private equity, hedge funds, LBO firms, and venture capital, regardless of what the textbooks say. Along with the customary 1% to 2% management fee on the investment net asset value, these funds typically keep 20% of the profits generated each year as payment. Often all they do is use options or debt financing to increase returns. They go to Las Vegas with your money, keeping a good portion of the upside while you bear all the risk. Some of them do a good job of it.
The quote above from FinanceDude was in reaction to my suggestion that an investor could simulate private equity risk/return by simply taking out a loan (tax deductible if it is home equity) and then investing it herself in some good, low fee stuff. If the funds are particularly good, they buy the companies that the private equity firms subsequently buy at a big premium, thereby getting a cut of the action everybody is talking about. By approaching it this way, you eliminate the middleman and the highway robbery fee structure of private equity while goosing returns in the long run. Sure, you don't get the peace of mind associated with reduced or zero debt, and you can still incur losses in the short or medium term, but remember I was only suggesting it as an alternative to private equity, not a generic strategy for the most FIRE'd people. I think it a very sound alternative to private equity and would be interested to hear why FinanceDude suggests it is not.