Friday, September 23, 2022

PEU Party in Cannes

The greed and leverage boys gathered along the French Riviera to sell the private equity underwriter (PEU) method of investing.  It's high fee and low tax.  The PEU way leverages debt and political connections for profit.  

When times are good PEU sponsors bleed affiliates with dividend recapitalizations.  When times get tough affiliates can find themselves stressed for operating cash as the greed and leverage boys won't throw good money after bad.  If it gets bad enough affiliates can be cast into bankruptcy.

A newer option is to sell an affiliate to a sibling fund in the same PEU family.

FT reported:

Mikkel Svenstrup, chief investment officer at Denmark’s largest pension fund ATP, used his platform at the conference to compare private equity to a pyramid scheme

He complained about the industry’s use of “continuation funds”, a fast-growing model in which a private equity group sells a company to itself by shifting it between two of its own funds. And he said he was “looking very carefully” at “all those tricks they do to kind of manipulate” returns figures. 

 Bloomberg reported

... continuation funds allow buyout firms -- also known as general partners -- to keep raking in management fees from existing or new clients.

Neuberger Berman is planning to deploy a chunk of the $4.9 billion it has raised for second-hand private equity deals on so-called continuation funds.

Is Neuberger looking for PEU affiliates on life support?  It may find ample opportunities going forward. 

The greed and leverage boys want to open their offerings to the more common investor.   This PEU hunt for cash from individuals is characterized as the "democratization" of private equity.

Common Dreams reported on dark money in American democracy

Proponents of democracy responded with disgust Thursday after Senate Republicans filibustered the popular DISCLOSE Act, which seeks to expose the super-wealthy donors who are spending unlimited amounts of undisclosed money to ensure that the U.S. government advances their interests at the expense of the vast majority.  

PEU founders have long been policy making billionaires.  America's hallowed halls of government have long been occupied by greed and leverage boys.  

Politicians Red and Blue love PEU and increasingly, more are one.  One can keep the PEU party on the Riviera rolling, even as they take their last breath.  

Update 9-26-22:  FT ran another story on continuation deals and  conflicts of interest in moving affiliates from one PEU fund to another.  It also reported that a PEU billionaire lamented that crypto is not as ethical as private equity.  Ah, failing to meet the already low ethical standards of the greed and leverage boys...