Private Equity's Foggy Forebears

The universe of similar publicly traded alternative investment vehicles is small. It includes Allied Capital (ALD Quote), with a market cap of $4.2 billion.

Thus far, American Capital's performance has been stellar. It has generated internal rates of return of 24% since it was launched -- a number that compares favorably with PE shops and hedge funds, which usually aim for returns in the 15% to 20% neighborhood.

"As an operating company, we're one of the best performing operating companies," boasts Wilkus.

The company has drawn its share of scrutiny, though.

The Securities and Exchange Commission conducted an inquiry of American Capital four years ago tied to short selling and valuations of the companies that it acquires. American declined to comment on specifics of that matter and since the investigation was informal, it's unclear if anything ever came of it.

But part of the SEC scrutiny might be tied to the company's debt-to-equity ratio, which has meant the company has had to be mindful of its public offerings.

American Capital regularly uses so-called equity forwards -- essentially agreements in which the underwriter shorts the issuing company's shares and distributes proceeds at a designated price as it needs funds and the issuing company covers any loss the underwriter incurs, explains an underwriter for American Capital at a Manhattan-based investment bank, who declined to be identified.