Monday, October 2, 2023

Fed to Back Up the Whole PEU Mess?


Private equity firms have been increasingly adding another layer of debt to their complex borrowing arrangements, raising concern among some investors about potential risks to the wider industry and the financial system.

Hit by a drought of deals and dwindling cash, some buyout firms are starting to resort to backroom financing to help meet fund commitments or enable succession planning. 

The loans — backed by assets including the promise of future income — carry interest of as much as 19%

The Bank of England recently set up a lending facility for non-banks.  Are they anticipating trouble with private equity underwriters (PEU)?

“The investor universe is unbelievably unaware of the underlying leverage throughout this entire ecosystem,” said New York-based Dan Zwirn, founder and chief executive officer of Arena Investors,

Obscene leverage level sand Carlyle Capital Corporation in the run up to the Fall 2008 Financial Crisis.  JP Morgan sees some parallels between 2007-08 and today's financial environment.

JPMorgan equity strategists have reiterated their concern that investors are looking through too many risks and are too complacent, with headwinds gathering pace and tailwinds petering out.

The Carlyle Group took a stake in Captrust, an amalgamation of registered investment advisors.   Fellow PEU GTCR invested in Captrust several years ago.

Since 2020, Captrust has made 29 acquisitions of registered investment advisory firms. It now has $832 billion of assets under management.

Those RIAs are in position to push PEU investments.   Should the Fed have to step in and back up the whole mess my wise friend's thoughts would be realized (yet again).

In the end they are the greatest socialists; they are funded, aided and abetted by central planners. The worst part about the whole scheme is it's clearly a ponzi supported by the government for the benefit of the insiders.  They are the welfare Queens. Yet, the masses are more worried about a malnutritioned family getting an EBT card that doesn't support enough calories a day to live healthy.  Oh the strong casting of judgment on the weak.  What men we have among us.  This whole thing needs to come down hard.

People wake up slowly, then all at once.  Stay tuned.