Private Inequity: The Coming Private Equity Bust

Forbes magazine has a dishy diss of the private equity business in the current issue. It is long, but still worth reading in its entirety. The criticism that caught my eye most directly was one directed toward large investors in private equity funds themselves:

“I can’t think of an industry structure that’s more screwed up,” says one manager of a midsize buyout firm. “The biggest suppliers of capital”–the pension funds–”are the most thinly staffed and underpaid,” he says. State plans with a few employees oversee billion-dollar investments and report to “political entities–their boards–relying on consultants whose business is mostly about marketing and politics,” he says.

They aren’t any match for the buyout guys–who already are anticipating a  coming correction and are preparing to profit from it. Some of the biggest names in buyouts–Blackstone, Carlyle, Apollo Advisors–now are raising “distressed investment funds” (read: vulture funds). Feeding on big discounts, they will buy the equity and debt of companies their brethren helped get into trouble.

Related posts:

  1. Collusion in Private Equity
  2. The Private Equity Boomlet
  3. The Private Equity Bubble
  4. Jeremy Grantham on Private Equity
  5. LPs Offer Private Equity Pecking Order

Comments

  1. qrswave says:

    that’s the nature of the game, isn’t it?

  2. What is, gaming the LPs? Sure, but it only goes so far before you find yourself under a regulator’s heel.

  3. qrswave says:

    the game of manufacturing need, then exploiting it. The fact that it results in increased regulation is not THE problem – although any increase in government intervention is decidedly bad.
    The real problem is that this kind of mentality, ‘profit by bleeding others’ is utterly bereft of objective value (i.e., it benefits only a few) and completely unsustainable.