Saturday, July 5, 2014

The PEU Effect

Private equity underwriters (PEU's) became ubiquitous this past decade.  The Carlyle Group grew from $19 billion in assets under management in 2004 to $199 billion today.  That's 950% growth in ten years or an average of 95% per year.  Investors selected Carlyle based on their historical 30% annual returns on equity. 

PEU greed combined with executive incentive compensation to balloon corporate profits.  The question is how much is real profit growth and how much is fudged figuring.  I would trust the accounting profession to keep things clean, but they've sold out like their human resources brethren. 

Greed is alive and well, in part due to PEU's.