Private capital has raised more money than it has returned
1–10 of 22 posts
Re: Private capital has raised more money than it has returned
#2Re: Private capital has raised more money than it has returned
#3Not coincidentally, the managers can charge fees only on the capital they're managing, i.e., the capital they haven't returned.
Re: Private capital has raised more money than it has returned
#4They don't define their terms.
> Hedge Fund
> A hedge fund is a limited partnership of private investors whose money is pooled and managed by professional fund managers. [1]
> Private capital / equity
> Private equity describes investment partnerships that buy and manage companies before selling them.
> Private equity is often grouped with venture capital and hedge funds as an alternative investment.
Then, interestingly, they've been more fashionable lately:
> The private equity industry has grown rapidly amid increased allocations to alternative investments and following private equity funds' relatively strong returns since 2000.
Which might explain why working at public companies has been so crappy for the past several years.
But the best bit comes from this article [3]:
> One hedge fund manager currently trying to raise capital said investors often cited the lack of distributions they had received from their private equity investments as a reason why they would not invest.
They won't invest in a safer bet, because they got burned by a bad one. Amazing. No wonder it's so easy to make money investing for people/orgs with money if this the behaviour you can expect from them. Is it really as simple as: "Hey I heard this was a good investment, give me money."? If that's an example of the simple-minded thought process that investors go through, it must be so simple to earn money this way.
[1] https://www.investopedia.com/terms/h/hedgefund.asp
[2] https://www.investopedia.com/terms/p/privateequity.asp
[3] https://www.ft.com/content/62b1db7b-3e78-47ca-865e-02cc40491...
Re: Private capital has raised more money than it has returned
#5Not coincidentally, the managers can charge fees only on the capital they're managing, i.e., the capital they haven't returned.
The point of investments is that they grow. If the managers grew the money well, they'd still have plenty of capital under management after returning some back to the investors.
Re: Private capital has raised more money than it has returned
#6My opinion is that private equity is the biggest scam of them all.
It’s essentially just money poured in unregulated markets, fueling unaudited businesses very often highly in debt and running on very shaky grounds, in such way that they could have never been listed publicly. The whole private equity sector is kept alive only by more money poured into system and more debt, in the end looking very similar to a pyramid scheme.
Re: Private capital has raised more money than it has returned
#7Not coincidentally, the managers can charge fees only on the capital they're managing, i.e., the capital they haven't returned.
The point of investments is that they grow. If the managers grew the money well, they'd still have plenty of capital under management after returning some back to the investors.
Serious question: why would I do that?
I mean, sure, at some point. But there's no regulation/oversight telling me I have to give you any back. In fact, my T&Cs probably say specifically I don't. If I give you 1%, that's 1% less that I have to play with. And it seems that in this market, if you don't like it, there's a line of folks behind you willing to write a check. Private capital is where you park your phuck-you money, so everyone involved seems reasonably ok with the status quo.
Re: Private capital has raised more money than it has returned
#8>And this isn’t just about the recent glut of capital raised, lagged returns and private equity exit blockages either.
Lagged returns is exactly the explanation here. They publish the table of investments and returns by year. Obviously you don't get your money back the same year you invest it. It's more often a ~7 year investment. But let's round down to 5 years.
Look at the chart and compare the investment in PE to the return 5 years later. It's a gain of 80-100% in that time.
This is simply how the math works when the investments into a strategy are growing exponentially, with a delayed return. It can continue indefinitely to produce 100% returns for investors, while a snapshot at any given time will make it look like the strategy has lost money overall.
Re: Private capital has raised more money than it has returned
#9My opinion is that private equity is the biggest scam of them all. It’s essentially just money poured in unregulated markets, fueling unaudited businesses very often highly in debt and running on very shaky grounds, in such way that they could have never been listed publicly. The whole private equity sector is kept alive only by more money poured into system and more debt, in the end looking very similar to a pyramid…
I see people say this and just have to ask what you think you know that the investors in PE funds don’t? Asset management is an insanely competitive industry. There are loads of alternatives products available. Why would people continue to invest in a scam? Do you think there is a chance you don’t understand the industry as well as the asset allocators who study it full time?
Re: Private capital has raised more money than it has returned
#10Earlier quoted context omitted.
The point of investments is that they grow. If the managers grew the money well, they'd still have plenty of capital under management after returning some back to the investors.
Serious question: why would I do that? I mean, sure, at some point. But there's no regulation/oversight telling me I have to give you any back. In fact, my T&Cs probably say specifically I don't. If I give you 1%, that's 1% less that I have to play with. And it seems that in this market, if you don't like it, there's a line of folks behind you willing to write a check. Private capital is where you park your phuck-you…
> In fact, my T&Cs probably say specifically I don't.
What basis of experience do you have to say “probably”? Where do people get this overconfidence. This is absolutely not true and is well defined in most subscriptions, especially post 2008.