Private Equity is a TERRIBLE Investment... Who Keeps Giving Them Money?

Tavsif:

20 years ago if you asked the average person what they thought about private equity they would probably have no idea what you were talking about. The business was a small, un‑glamorous, and overlooked side of finance that people went into if they couldn’t land a job in a hedge fund where the real money was made. Since then, changes in regulations, investor preferences, and the availability of cash have allowed the industry to grow to over twenty times its size back in 2000. In that time it minted dozens of billionaires, acquired millions of businesses, developed a bad reputation, and simply grew too big for its own good. The thing that originally made private equity a competitive investment was its small size and understated operations. But, not unlike a parasite that has outgrown its host, the biggest threat to private equity today is private equity itself. Deals are getting harder to find, fees are getting harder to justify, and returns are simply not worth the risk. Now I know that you might think that sounds like a problem for wealthy investors and asset managers, not you… but the whole system only works by borrowing a lot of money through business structures that look like this and assuming that things will keep growing forever. If that doesn’t happen, there are now trillions of dollars in loans that could go bad, and I am sorry to be the one to tell you… but that is going to be a problem for you. So if private equity has become such a bad investment… who keeps on giving them money?