Goldman Sachs

By Quantumquark (Own work) [CC-BY-SA-3.0], via Wikimedia Commons

Happy Halloween!

The scariest goblin among us? Private Equity.

The New York Times says that many Private Equity funds refuse to provide information on their fees and expenses to the people who get charged those fees and expenses, often without their knowledge. First, what is “Private Equity?” “Private Equity” means the companies owned by a smallish number of people that buy businesses and squeeze out the profit. Often – often – Private Equity will buy a healthy business built by a town of people, take huge loans on the business to fund the purchase itself, take enormous fees for its purchase and then drain the business of cash through debt payments and management fees.

Private Equity is a looming cancer on the buttock of American finance. Greedy, sociopathic, totally divorced from patriotism or duty, Private Equity’s only mission is immediate profit for the co-owners in the Private Equity firm. Whole states have been destroyed by Private Equity’s devastating take on what makes a successful business.

The only thing that truly makes a successful business is the next monster sale or fee that can be wrenched out of it. Private Equity uses bravado and arrogance to convince the rest of us that capitalism must be a cruel game with a few winners who win big. That’s one of the reasons why Private Equity invests money for so many pension funds – because they’ve convinced the suckers who run those pension funds that they know best. Attached to the New York Times article is a survey of pension fund managers and other institutional investment managers that shows that even though they know Private Equity’s interests are not aligned with them, they still usually invest with them.

If you have a pension, demand to know what fees and expenses are coming out of your pool. If you manage a lot of funds, demand to know what fees and expenses are coming out of your funds. And, if you are intimidated by the Private Equity guys, so you give them the benefit of the doubt, then retire now and get a job that requires no judgment or cynicism.

Read the story here.

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