We Live in PEU Times

The average person knows something isn't right.  They may or may not have worked for a private equity affiliate.  If so, they've experienced a hard change in priorities, seen co-workers lose their job so money could be repurposed to interest expenses, management fees and or sponsor dividends.

The image above came from an excellent story by FT, "Is private equity actually worth it?"  A Norwegian Sovereign Wealth fund wants to dedicate more money to private equity underwriters (PEU), my pet name for the greed and leverage boys.  

I started PEU Report in 2007 to shine the light on this burgeoning asset class that seemed to be a parasite on the federal budget.  Non-lobbyist PEU founders ponied up to the political class in ways that preserved their preferred "carried interest" taxation to this day.  They became known as "policy making billionaires."

Last night comedian Stephen Colbert described his "not right" as "a constant, grinding existential dread."

The Real News Network's Chris Hedges did a two part story on private equity, "How private equity conquered America."  The second part of Chris' interview with author Gretchen Morgenson is below:

Naked Capitalism did an outstanding piece on private equity in mid February.  It highlighted an FT story on a pension fund executive stepping down.  That executive said private equity needed to share more with workers and their communities.

Limited partners like CalSTRS, who are, in Wall Street parlance, the money, have not even been able to get basic disclosures from the general partners like how much in total the private equity firms hoover out in fees and expenses, despite many years of pleading. Mind you, it’s a requirement for a fiduciary to evaluate the costs and risks of any investment, yet these investors have accepted this abuse. 

Limited partners don’t get P&Ls of portfolio companies. They don’t get independent valuations even though that is considered to be essential for every other type of investment. So it’s ludicrous to think that general partners will share money with one of the very weakest parties in the picture, mere workers, when they won’t give information to the limited partners.

There is a significant power imbalance and throw away statements won't impact anything.  I am encouraged the word is getting around.  

Politicians Red and Blue love PEU and increasingly, more are one.  That isn't right.