BS Earnings for Q4

Institutional investors want out of 7% of Blackstone Property Partners.  However, corporate private equity gained 3.8%. 

Its opportunistic and core real estate funds depreciated by 2% and 1.5%, respectively. Secondary funds fell 1.8% while corporate private equity and private credit funds gained 3.8% and 2.4%, respectively.

Word was that private equity lagged, i.e. lowered more slowly than the public market.  Some may have expected lower equity pricing to show for the greed and leverage boys in Q4.  Not so for Blackstone.

Rubenstein Interviewed RLJ in Palm Beach

Carlyle Group co-founder interviewed Robert L. Johnson in Palm Beach the day before Thanksgiving for Bloomberg.  (President Joe Biden was at Rubenstein's Nantucket estate while the RLJ interview occurred).

Host Rubenstein actually acknowledged his firm's investment in Johnson's private equity firm.  The pair covered Johnson's history with BET and the Charlotte Bobcats before discussing owning the Washington Football Team.

Johnson said giving money to politicians is "part of the game" but finds the political appointment system as "lacking integrity."  Both men are policy making billionaires and have access to elected officials.

Flashback to 2007 when I reported that President George W. Bush served on the board of Carlyle affiliate CaterAir and called billionaire Johnson a "community banker."

The game continues with its lack of integrity.  Thank you Mr. Johnson for reminding us.

Gravity Exists for Levered Equity

Bloomberg noted that gravity still applies to levered equity.  Gravity in public markets has been more severe.  Think of private equity underwriters (PEU) as the Hudson Bay of finance.  CondeNast reported:

Gravity isn’t uniform all over the Earth’s surface. It’s a result of mass, which means the varying density of the Earth at different locations can affect how much you weigh there. Canadians aren’t all free-floating like Sandra Bullock, but the effect is definitely measurable. In the Hudson Bay region, the average resident weighs about a tenth of an ounce less than they would weigh elsewhere.

Private equity sponsors load affiliates with debt, deal fees and management fees.  The greed and leverage boys use nonstandard measures to juice performance numbers.

How all this plays out remains to be seen, however the reckoning awaits.  

Update 1-27-23:  Institutional investors want out of 7% of Blackstone Property Partners.  However, corporate private equity gained 3.8%. 

Its opportunistic and core real estate funds depreciated by 2% and 1.5%, respectively. Secondary funds fell 1.8% while corporate private equity and private credit funds gained 3.8% and 2.4%, respectively.

Gravity still works much slower in PEU land.

Joe Biden Loves PEUs: Zients, Rubenstein and son Hunter

President Joe Biden loves private equity underwriters (PEUs) and one is his son Hunter.  

Carlyle Group co-founder David Rubenstein met with Hunter Biden (Rosemont Realty), his dad and Jeff Zients (Cranemere Group, Portfolio Logic LLC) in February 2016.

During the first meeting — which took place on Feb. 12, 2016 — Jeff Zients, Hunter Biden, then-Vice President Biden met with David Rubenstein, a billionaire and founder of hundred-billion-dollar asset management firm The Carlye Group.

PEU Jeff Zients is expected to be President Biden's next Chief of Staff .  Hunter Biden served on the Advisory Board of Rosemont Capital's Realty arm and the Board of Ukrainian gas company Burisma. 

Then Vice President Joe Biden's PEU love is evident in this 2016 meeting.  He showed it once he became President with his many PEU cabinet appointments.  Now Biden stands to show it again by replacing PEU Chief of Staff Ron Klain with PEU Chief of Staff Jeff Zients.

Hunter's next two meetings with Zients included David G. Bradley who has a history of flipping companies.  Bradley sold GovExec to a private equity firm in March 2020.

Zients possible appointment as White House Chief of Staff has been all over the news, except Gov Exec.

The final PEU to meet with Hunter and Zients is Eric Lander (F Prime Capital).  The Hunter Biden laptop is a useful tool in playing follow the PEU.  It's the way the U.S. does business.

Politicians Red and Blue love PEU and increasingly, more are one.

Update 6-30-23:  A Senate subcommittee issued a September 2020 report on Hunter Biden's gorging at the insider money trough.  That boy can flat out eat.  It's PEU level greed.

Santos Met Epstein at PEU Conference

The George Santos insanity tour continues with his statement that he met Jeffrey Epstein.

"I met Epstein in a couple of private equity conferences," Santos said on the conservative podcast "The Rory Sauter Show" in August 2020. "I've never dealt with him personally, but I've met him, I've seen him."

Jeffrey Epstein was arrested in July 2019 and found dead in his jail cell the next month.  Epstein died before digital private equity underwriter Harbor City Capital employed Santos.

Harbor City Capital, reportedly hired Santos in 2020 to recruit investors, and he secured at least one investment in the six-figure range. 

Harbor City Capital was accused of being a ponzi scheme by the SEC.  Santos worked for the firm in 2020 and 2021.  An investor who relied on Santos' representations filed a complaint with the SEC.

Santos "claimed almost no assets or income" in 2020 in his personal financial disclosure for his first Congressional campaign.  It's hard to believe a man with almost no assets or income in 2020 attended private equity conferences when Epstein was alive and working for Apollo founder Leon Black.

What's a little political puffery between PEUs?

Update 2-6-23:   A story on Santos' use of donated funds to his pet "charity" could reveal his Epstein connection:

Santos boasted of his fundraising prowess, saying he was a financial money manager with connections. In reality, he had worked for a Turkey-based hospitality technology company, eventually moving on to work at a small company that organized conferences for investors and fund managers.

Update 3-24-23:  The Hill reported:

Santos will formally confess to defrauding a Rio de Janeiro clerk of $1,300 in clothes and shoes in 2008 and pay damages to the victim

Biden Chief of Staff: PEU to PEU

President Biden will change his Chief of Staff in the near future.  Current Chief of Staff Ron Klain (Revolution LLC) will be replaced by Jeff Zients (The Cranemere Group and Portfolio Logic LLC).  Biden will go from one private equity underwriter (PEU) to another.  

Zients left PEU Cranemere to join the Biden White House.   

The Cranemere Group Ltd.

Prior to (joining) Cranemere (as CEO), Jeff served as the Director of President Obama’s National Economic Council. Jeff previously served as the acting director of the Office of Management and Budget and also was responsible for the technology turnaround of healthcare.gov. Before serving in Government, Jeff served as the Chairman, CEO, and COO of the Advisory Board Company and Chairman of the Corporate Executive Board. During his tenure, these companies created more than $2 billion in equity value for shareholders. Jeff also founded Portfolio Logic, an investment firm focused on healthcare and business services, serving on several portfolio company boards. With his wife Mary, he was part of the founding group of the Urban Alliance Foundation which provides economically disadvantaged youth with job training.

An SEC filing on the Pediatric Services of America (PSA) buyout showed Zients role with Portfolio Logic.  Four of the five signatures on the deal were Zients.

About Portfolio Logic LLC 

Portfolio Logic, a Washington, D.C.-based investment firm, primarily focuses on healthcare and business services companies. Jeffrey D. Zients, Managing Partner, previously served as Chairman of both The Corporate Executive Board and The Advisory Board, two successful business-to-business content companies serving these industries.

Portfolio Logic bought out PSA in 2007.

A 2015 Justice Department settlement with PSA stated:

The U.S. Attorney's Office announced that Pediatric Services of America Healthcare, Pediatric Services of America, Inc., Pediatric Healthcare, Inc., Pediatric Home Nursing Services (collectively, "PSA"), and Portfolio Logic, LLC agreed to pay $6.88 million ($6,882,387) to resolve allegations that PSA, a provider of home nursing services to medically fragile children, knowingly (1) failed to disclose and return overpayments that it received from federal health care programs such as Medicare and Medicaid, (2) submitted claims under the Georgia Pediatric Program for home nursing care without documenting the requisite monthly supervisory visits by a registered nurse, and (3) submitted claims to federal health care programs that overstated the length of time their staff had provided services, which resulted in PSA being overpaid.

And the reason private equity firms keep buying healthcare companies?  PPACA (Obamacare) designer Nancy-Ann Deparle was a PEU.  She received payments for residual private equity holdings that were not declared on her financial filings.  Senator Rick Scott (Red Team) did his best to hide his PEU healthcare holdings.

Flashback to 2006 when Zients was trying to buy the Washington Nationals:

Jeffrey D. Zients may work full time on his bid to buy the Washington Nationals, but in the past year he has taken some swings at the private equity business.

The Nationals are currently being pursued by fellow PEU and Carlyle Group co-founder David Rubenstein.

Politicians Red and Blue love PEU and increasingly, more are one.  They need continued access to Uncle Sam's wallet and "Just Us politically connected PEUs" Department.  The Biden cabinet is chock full of former PEUs.

The question is how many undisclosed residual PEU investments does Zients have?  How many residual PEU investments remain undisclosed on the wider Biden cabinet?  

Health reformer DeParle returned to her PEU roots.  Will Ron Klain do the same?

Update:  Zients started another PEU, Capital Logic Partners with friend John K. Delaney:

Capital Logic Partners was a private equity firm that was based in Washington, District of Columbia. The firm focused on small and middle market equity investments in manufacturing and service industries.

Update 1-24-23:   Zeints met with then Vice President Joe Biden, Hunter Biden and David Rubenstein in February 2016.  It was VP Joe and the PEU boys, one of them his.

"If shame were still operative in the modern politics of America" then Zeints would not replace Klain and the Biden Cabinet would have public servants without PEU ties.  

Update 2-15-23:  PEU Zeints took over last week for fellow PEU Ron Klain as White House Chief of Staff.  Klain went on Stephen Colbert and hit a Ted Cruz joke into outer space.  There is no word yet on which PEU may land Klain's services.

Update 4-25-23:  Ron Klain will be advising PEU executives from his former law firm O'Melveny.

Update 9-13-23:  Zeints' family is ringing the register as the result of Uncle Sam's support of TechMet.

These Are the Days in Davos

Microsoft executives had their Marie Antoinette moment in the Swiss Alps, courtesy of a Sting concert.  It happened the day before announcing 10,000 employees would lose their jobs.  

I'm sure many more have lost faith in corporate leadership.  The move may have driven some workers mad.  These are the days at the World Inequality Forum in Davos, Switzerland. 

Update:  A fired Google engineer said tech giants view staff as 100% disposable.   That stings.

Update 1-24-23:  Microsoft execs must have missed the WEF podcast on generous listening.

Santos Horns in on Rubenstein's Territory

Fraudster Congressman George Santos cited his background as a digital private equity underwriter (PEU).  Carlyle Group co-founder David Rubenstein invested in crypto play Paxos through his family office Declaration Partners.  He frequently promoted crypto as enticing.  Last summer Rubenstein interviewed his peer Sam Bankman-Fried.  Neither disclosed they both had invested in Paxos.

Santos may already be a billionaire in his mind.  He is taking a page from Rubenstein by donating his salary to charity, his entire salary.  That should make voters nervous.  If he can afford to give away his salary, who is backing Santos?  This information is important to know given his checkered credit past.  

David Rubenstein may have another new peer, George Santos digital PEU and patriotic philanthropist.  It would certainly fit with Santos' fantastical ideations.  When can the peer-to-peer interview be arranged?

Politicians Red and Blue love PEU and increasingly, more are one.  This political cancer is metastasizing with George Santos.  Citizens can see it with their naked eye.

Update:  Americans for Financial Reform had this to say about PEUs and their policy making billionaire founders:

“This long-running perversion of finance allows private equity firms to profit even as they render the companies they control less competitive due to the burden of crippling debt.  The contrast is striking. Private equity barons get richer at the expense of the economy that gets fewer jobs, less investment for the future, and lower wages as companies prioritize paying down debt, not growth.”

Update 1-21-23:  The National Republican Congressional Committee gave up publishing Rep. George Santos' lying bios.   The gay Brazilian drag queen firecracker is now just a plain cracker.  It's a new generation of Insane Red Team liar-ship.

Update 1-24-23:  Santos filed a new campaign finance report showing a $500,000 loan wasn't his personal money.  The question as to who is backing Santos remains unanswered.

Update 2-6-23:   There are questions regarding Santos use of donated funds to his pet "charity."

Santos boasted of his fundraising prowess, saying he was a financial money manager with connections. In reality, he had worked for a Turkey-based hospitality technology company, eventually moving on to work at a small company that organized conferences for investors and fund managers.

Silvergate Saved by Federal Home Loan Bank

Cryptobank Silvergate would likely be defunct if it had not received billions in advances from the Federal Home Loan Bank of San Francisco.  CryptoSlate reported:

Silvergate Bank received $4.3 billion from the San Francisco-based Federal Home Loan Bank last year, following the collapse of crypto exchange FTX, according to the firm’s Q4, 2022 flings.

As of December 31, 2022, Silvergate held total cash and cash equivalents of approximately $4.6 billion, which is in excess of deposits from digital asset customers.  

At December 31, 2022, the Company held $4.3 billion of short-term Federal Home Loan Bank advances.  

Silvergate’s 10 biggest depositors, including Coinbase, Paxos, Crypto.com, Gemini, Kraken, Bitstamp, and Circle, represented about half of the bank’s deposits.

Paxos received a national bank charter in April 2021.  At the time Paxos General Counsel said:

“The national charter was designed expressly to allow banks to conduct business across state lines more easily. This flexibility allows a young company like Paxos to focus resources on building great products. A national Trust Bank charter provides us with flexibility to operate across the US while continuing to adhere to the highest regulatory standards.”

He added that the approval would “further support our approach to innovation within regulation and drive important long-term benefits for our clients”.

There is very little regulation for cryptocurrencies.  The American Banking Association opposed granting Paxos a bank charter.

The American Banking Association opposed the application arguing that the information in its application was “vague” and the descriptions it provided about its cryptocurrency and fiduciary activities “was not sufficient” for a trust charter.

ABA CEO Rob Nichols said in a recent podcast published by financial consultancy Barefoot Innovation Group that “there should be some degree of levelness as it pertains to supervision and consumer protection” for new market entrants offering bank-like services.

He added that, in future, should a bank-like entity want to enter the US marketplace, regulators must “be careful” and think about what it means “for the overall system, and its safety and security”.

The public learned of Silvergate's $4.3 billion FHL bank loan via an SEC filing.  Paxos is not publicly traded, thus no SEC filing is available.

FHL Banks website cites its "safety and soundness."

The FHLBanks have never incurred a loss on an advance in their more than eight decades of existence. This record is attributed to the collateralization of all advances, conservative underwriting standards and strong credit monitoring policies. All of the FHLBanks’ lending is fully collateralized. Additionally, if a loan in a pool of collateral is underperforming, it must be replaced. The credit profiles of members are actively monitored. FHLBank investments are also very safe. By regulation, they are prohibited from purchasing non-investment grade securities and nearly all of their investments are triple-A rated.

Crypto is the near opposite of a safe investment.  Economist Nouriel Roubini said in Davos:

"Literally 99% of crypto is a scam. A criminal activity. A total real-bubble Ponzi scheme that is going bust."

Paxos needed capital during the crypto winter.  Did it get it from investors, like Carlyle Group co-founder David Rubenstein? Or did a FHL Bank come to the rescue like one did for Silvergate?  Maybe both?  We may never know.

Update 1-20-23:  Crypto lender Genesis declared bankruptcy for its holding company and two affiliates.  The Street reported:

Crypto lender Genesis Global Holdco LLC filed for bankruptcy on January 19.  Genesis (GGH) and two subsidiaries Genesis Global Capital et Genesis Asia Pacific have filed for Chapter 11 bankruptcy protection in the Southern District of New York.

JP Morgan CEO Jamie Dimon said:

At the World Economic Forum in Davos, Switzerland, on Thursday, Dimon bashed cryptocurrencies as a distraction.  

“I think all that's been a waste of time and why you guys waste any breath on it is totally beyond me,” he told CNBC. “Bitcoin itself is a hyped up fraud. It’s a pet rock.”

So Silvergate is pet rock bank? 

Update 3-9-23:  Silvergate Bank will be unwound.  

On Thursday several crypto firms made statements meant to distance themselves from crypto-friendly bank Silvergate, which saw shares free fall on Thursday after the company delayed its annual report and said it would report further losses.

Coinbase, Paxos, Galaxy Digital, Gemini, BitStamp, Crypto.com and Circle each issued statements saying they have cut ties with a once crucial partner linking them to the traditional bank system. MicroStrategy has also addressed concerns for its Silvergate loan in the event the bank faces insolvency.

PEU Founders Speak at Davos

Carlyle Group co-founder David Rubenstein and Blackstone Group co-founder Stephen Schwarzman offered their thoughts at the World Economic Forum in Davos, Switzerland.  Yahoo Finance reported:

Billionaire investor David Rubenstein is the latest Wall Street titan raising doubts about the Federal Reserve's ability to reach its current inflation goals.

"I think the Fed will probably target inflation down to about 3%, not 2%"

Rubenstein added:

...he doesn't see a recession in the cards this year, even as many financial institutions forecast an economic downturn and cut costs to prepare for one.

"The numbers that we have and our own companies at Carlyle don't suggest that a recession is imminent," Rubenstein said. "I don’t really think it’s clear we’re going to go into a recession in the third or fourth quarter."

Bloomberg reported:

Blackstone Group Chief Executive Officer Steve Schwarzman said the US needs a new raft of leaders in both political parties.

He's ready for the next generation of political leaders.  Red Team supporter Schwarzman said he is tired of losing elections, citing four in a row.  

The U.S. needs a new raft of leaders not beholden to Schwarzman's and Rubenstein's billionaire class.  They are not likely in attendance at the World Inequality Forum.  

Update:  The reason we may need a new crop of U.S. leaders is the current group may send our debt rating into the toilet. That would drive interest rates up on our debt and add to inflationary pressures, something the Davos crowd wishes to avoid.  

Update 1-20-23:  Americans for Financial Reform had this to say about PEUs and their policy making billionaire founders:

“This long-running perversion of finance allows private equity firms to profit even as they render the companies they control less competitive due to the burden of crippling debt.  The contrast is striking. Private equity barons get richer at the expense of the economy that gets fewer jobs, less investment for the future, and lower wages as companies prioritize paying down debt, not growth.”

High Five News from World Inequality Forum

U.S. Senators Joe Manchin and Kyrsten Sinema celebrated blocking a key change while on stage at the World Economic Forum in Davos, Switzerland.  They slapped hands over filibuster reform but could well have done so  for a different stonewalling.

They prevented the elimination of private equity's preferred "carried interest" taxation to the benefit of many billionaire founders.

Both senators have outstanding employment prospects post Congressional service.  I expect Sinema to land at a politically connected private equity underwriter for catering to the billionaire boys.  

Update 1-24-23:  Sinema is fresh from attending the World Inequality Forum in Davos and rubbing elbows with the billion class.  It turns out the PEU boys were very generous with the Independent Senator after she saved their preferred taxation.  

Senator Krysten Sinema received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing a bill closing tax loopholes for private equity.

It sounds like the bidding has already started for her future services. 

Sinema may have missed the call for taxing the super wealthy by Patriotic Millionaires at Davos.   

“Extreme wealth is eating our world alive,” said Abigail Disney in a press release. “It is undermining our democracies, destabilizing our economies, and destroying our climate. But for all their talk about solving the world’s problems, the attendees of Davos refuse to discuss the only thing that can make a real impact—taxing the rich.”

World Inequality Forum Set to Kick Off

The World Economic Forum, an annual meeting of global tamperers, convenes in two days.  It's a deal making meeting of the private jet set in Davos, Switrzerland.  

The WEF's board of directors includes Al Gore of Generation Investment Management and David Rubenstein of The Carlyle Group.  Gore will speak at three sessions while Rubenstein interviews Palantir's Alex Karp.  Palantir has provided security for the annual event.

Private equity underwriters (PEU) have a much lower profile in the 2023 agenda.  It's harder to talk about fairness and equity with a session dominated by the greed and leverage boys.

FTX's failure is not on the agenda, however a path forward for crypto is the topic of one session.

This session is directly linked to the ongoing work of the World Economic Forum’s Digital Currency Governance Consortium.

That's likely a relief for Carlyle's Rubenstein whose family office has a stake in Paxos.  Rubenstein interviewed FTX's Sam Bankman-Fried on his Peer to Peer program.  Not mentioned in the interview was SBF's stake in Paxos or that SBF hit up the host's family office for funding.

What would it take to craft sufficiently robust regulation to realise the benefits of digital currencies while ensuring positive macroeconomic and societal outcomes?

Larry Summers will offer his insights in three sessions.

Is Rapid Growth Still Possible?

What Next for Monetary Policy?

Global Economic Outlook:  Is This the End of an Era?

Summers has his own crypto shadow, a six year long advisory role for Digital Currency Group. 

I doubt the WEF will explore its decade long failure to address income inequality or its role in legitimizing shady crypto companies.  Some things are just for show.  Let the deal making begin!

Update 1-14-22:  US. Representatives to the World Inequality Forum include:

• Ambassador Scott C. Miller -- Former UBS banker and Chair of Gill Foundation
• Secretary of Labor Martin J. Walsh
• Director of National Intelligence Avril Haines (former PEU with Tikehau Capital)
• United States Trade Representative Ambassador Katherine Tai
• Director of the Federal Bureau of Investigation Christopher Wray
• United States Agency for International Development Administrator Samantha Power
• Special Presidential Envoy for Climate John Kerry
• Senator Chris Coons
• Senator Maria Cantwell
• Senator Joe Manchin 
• Senator Kyrsten Sinema
  
• Representative Joaquin Castro
• Representative Madeleine Dean
• Representative Mike Gallagher (Red Team)
• Representative Darrell Issa (Red Team)
  
• Representative Gregory Meeks
• Representative Seth Moulton
• Representative Maria Salazar (Red Team)
  
• Representative Mikie Sherrill
• Representative Juan Vargas 
• Georgia Governor Brian Kemp
• Illinois Governor JB Pritzker
  

Update 1-15-23:  Yahoo Finance will conduct a billionaire watch at Davos.  Will they talk with Larry Fink who just signaled it was OK to jump back into bitcoin?  Will any laid off BlackRock employees be interviewed alongside Fink?

Most of us won't see PEUs Tony Blair, Jared Kushner or any of the other power attendees dominating Davos.

Update 1-16-23:  London School of Economics book review of "Davos Man:  How the Billionaires Devoured the World" offered:

(the author) focuses on an elaborate sleight-of-hand perpetrated by global elites primarily for their own benefit. He refers to these culprits both individually and collectively as ‘Davos Man’

As they adopt the veneer of benign benefactor, Davos Men exploit accounting loopholes and disproportionately avoid contributing to the common good. By donating to political campaigns, economic elites lobby governments to reduce their tax burden, a scheme that has been disturbingly effective. As government revenues slump, resources to fund social programmes dwindle, further exacerbating income and wealth polarisation. The resulting downward pressure on wages, in combination with fewer government programmes, has hit workers across the globe particularly hard.

And that's why billionaire PEU and Carlyle Group co-founder David Rubenstein pays a mere 11.4% in federal income taxes. 

malfeasance on the part of corporations and wealthy persons stems from two distinct sources: corporate tax avoidance (including the legal variants) and antitrust blocking. These are both exacerbated by political campaigns wherein special interests wield undue influence. 

Yet rather than blame the ultra-rich who have played a major role in engineering this economic malaise, unscrupulous politicians have used this opportunity to whip up voters by generating fear and animosity through blaming immigrants and minorities. 

That's why I say "Politicians Red and Blue love PEU and increasingly, more are one."   PEU Report has tried to shed light on these revelations since 2007.

Senators Manchin, Coons and Sinema met with CEOs at a private Davos luncheon. 

Update 1-24-23:  Sinema is fresh from attending the World Inequality Forum in Davos and rubbing elbows with the billion class.  It turns out the PEU boys were very generous with the Independent Senator after she saved their preferred taxation.  

Senator Krysten Sinema received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing a bill closing tax loopholes for private equity.

It sounds like the bidding has already started for her future services. 

Sinema may have missed the call for taxing the super wealthy by Patriotic Millionaires at Davos.   

“Extreme wealth is eating our world alive,” said Abigail Disney in a press release. “It is undermining our democracies, destabilizing our economies, and destroying our climate. But for all their talk about solving the world’s problems, the attendees of Davos refuse to discuss the only thing that can make a real impact—taxing the rich.”

Update 2-19-23:  Al Gore's Generation Investment Management sold stock in Alibaba, Taiwan Semiconductor and Shopify. 

Update 1-20-24:  Oxfam chronicled a decade of failure by the World Economic Forum to impact income inequality.

Expensive Tafamidis Has PEU Ties

Reuters reported:

New York-based Pfizer's medication, also known as tafamidis, treats a rare heart condition known as transthyretin amyloid cardiomyopathy that can lead to progressive heart failure. An estimated 100,000 to 150,000 Americans, mostly elderly, have the condition.

Sales of the treatment totaled $2.02 billion in 2021. A February 2020 study found tafamidis to be the most expensive cardiovascular drug launched in the United States.

Given the drug's high price, patients would need to bear yearly co-payments of roughly $13,000, with Medicare covering the rest. Pfizer's proposal sought to assist "middle-income" patients who do not qualify for low-income co-pay support but might still be deterred by its cost.

The U.S. Department of Health and Human Services' Office of Inspector General in 2020 concluded that the proposal could violate the kickback law by inducing patients to buy Pfizer's drug while leaving taxpayers to bear the costs.

Former investors in the firm that developed tafamidis include: 

Novo Ventures, Morgenthaler Ventures, Healthcare Ventures, Fidelity Biosciences, TPG Biotechnology, Alta Partners, and Novartis Venture Funds.

Blackstone formed Tafamidis Holdings LLC in February 2019 after the drug had unexpected success.

A Canadian pension fund reported a Q3 2022 credit investment:

Acquired tiered royalties on Tafamidis from Tafamidis Holdings, LLC, a Blackstone Life Science's portfolio company, for up to US$221 million in upfront proceeds and performance-based milestones. Tafamidis, sold under brand names Vyndaqel and Vyndamax, is a pharmaceutical agent that is used for the treatment of specific conditions in adults to reduce cardiovascular mortality and cardiovascular-related hospitalization.

I imagine the public would prioritize affordable medications over private equity underwriter (PEU) profits.  That's not the case with healthcare policy makers and elected officials.  The greed and leverage boys count on Uncle Sam's wallet for predictable, grand returns.

Politicians Red and Blue love PEU and increasingly, more are one.  It should be informative that walking, talking fraud Rep. George Santos is a digital PEU. 

Life Sciences Now Greed Infected

Reuters reported how the greed and leverage boys contribute to increased healthcare costs:

...buyout firms invest in the development of the drugs, typically when they are in so-called Phase 3 clinical trials, one step away from regulatory clearance. They negotiate with pharmaceutical companies the returns they will receive in advance.

In most cases, the drug makers start paying the money back to the private equity firms when the drug is being developed, either by issuing equity, tapping cash on hand or borrowing. They also share a slice of the newly developed drug's revenue with the private equity firms once it's approved.

Blackstone and The Carlyle Group, two politically connected private equity underwriters (PEU), were mentioned in the piece:

Blackstone established a major presence in the sector in 2018 after acquiring Clarus, an investment firm specializing in clinical trial deals with $2.6 billion in assets. The strategy was emulated last year by Carlyle Group Inc when it acquired Abingworth, a peer of Clarus with $2 billion in assets.

Carlyle is now preparing to raise a dedicated life sciences fund, using the Abingworth team, that could amass several billions of dollars, according to people familiar with the fundraising plans.

Washington Business Journal did a story on Carlyle's life sciences move. 

"We are big believers in what we've called the biopharma revolution and in the explosion of discovery and science," Steve Wise, Carlyle's global head of health, told Reuters.

Carlyle believes in making grand returns, frequently from Uncle Sam's wallet.  President Biden's cabinet is chock full of former PEUs.  Nearly every Medicare Chief became a PEU if they weren't one already.

Politicians Red and Blue love PEU and increasingly, more are one.  

The big question of course is how state and federal regulators, as well as elected officials in both political parties, did not see that the entire construct of crypto currency was at best a form of money laundering and at worse outright fraud. There was no segregation of accounts, no internal controls, none of the consumer protections that are already part of existing law and regulation. 

Just as they did not reign in crypto, elected officials choose the greed and leverage boys over citizens' needs for affordable healthcare.

Incredulous members of Congress held hearings about “regulating” crypto as though oversight could make fraud somehow acceptable.

The healthcare PEU moves are but a different kind of fleecing. 

...nearly one out of four Americans are unable to afford the medicine their doctors prescribe and too many seniors are splitting their lifesaving pills in half because they can’t afford them.

It's the kind that harms people.

Alaska Permanent Fund CIO Cites Overvalued PEUs

Chief Investment Officer reported:

“I’m as bearish on private equity as I have ever been in my career,” Marcus Frampton, CIO of the Alaska Permanent Fund (assets: $78 billion), told his board at a recent meeting, per news reports. “We haven’t seen the correction in private equity as we have in public markets.”

He added that PE has become increasingly expensive and that many PE asset valuations were too high and needed adjusting. The fund has been overweight PE, but he plans to reassess that allocation in coming months, perhaps reducing it by four percentage points.

The Alaska Permanent Fund gave $825 million to The Carlyle Group for investing.  The fund put money into Carlyle funds in 2013 and 2019.

Carlyle Group co-founder David Rubenstein's daughter Ellie was appointed to the Alaska Permanent Fund board last summer.  She runs Manna Tree Partners, also a private equity underwriter (PEU).

Update 1-5-23:  Institutional Investor ran a piece on PEU valuations. 

Speaking on a panel before an audience of institutional investors in New York, Rockefeller University investment chief Paula Volent noted that two of the endowment’s private investment managers held pieces of the same portfolio company — and that those managers had assigned that company completely different valuations.

Gotta love that leverage only cuts one way for the PEU boys.  It can rapidly raise asset prices but so far is immune to valuation meltdowns.  Sounds a little "fraud-ish."

UC Pumps $4 Billion into BREIT

Blackstone's stressed real estate investment trust (BREIT) targeted the individual investor.  Many investors wanted out after publicly traded REITs fell significantly and Blackstone's REIT valuation rose slightly.  

That caused a BREIT run forcing Blackstone to limit withdrawals, which made more investors want out.  Ironically a major investor rode to the rescue.  Bloomberg reported:

"...the University of California will inject the $4 billion into BREIT and Blackstone will backstop the university system’s investment by $1 billion if returns fall short of a goal. If the investment generates more than 11.25% annualized net returns, Blackstone will receive a higher payment from the university system. Blackstone will make money on the deal if returns are at least 8.7%, the company said."  

Weren't the PEU boys supposed to save public pensions and foundations, not be rescued by one?  

Update:  Bisnow reported:

Following in the footsteps of some major nontraded U.S. REITs, BlackRock plans to defer redemptions from its $4.2B BlackRock UK Property Fund for the third quarter of 2022.

Update 1-19-2023:  KKR gated its real estate trust due to higher requests for withdrawals than the allowed 5% per quarter.

Carlyle Group Executive Shedding Continues

The Carlyle Group continues to lose executives.  Law firm Vinson and Elkins issued a press release today announcing:

Vinson & Elkins announced today that Todd Triller has rejoined the firm as a partner in the M&A practice in the New York office. Triller returns to Vinson & Elkins from The Carlyle Group, where he was Managing Director and Co-Head of Energy Credit.

Triller, who was a partner at Vinson & Elkins from 2011-2017 prior to joining The Carlyle Group, focuses on advising investment funds in complicated alternative finance transactions. He also has experience counseling private equity, credit funds and financial institutions in connection with a range of energy transactions, including renewables, sustainable fuels, power, midstream and upstream oil and gas.

“This is an incredible time to come back to Vinson & Elkins with the firm so well-positioned to help clients navigate the energy transition and infrastructure investments,” Triller said.

Six years was long enough at Carlyle for Mr. Triller.  He is the latest to leave the politically connected private equity underwriter (PEU).

Update 1-14-22:  Carlyle's search for a CEO to replace Kewsong Lee may be nearing a close.