Private Equity wants access to your 401K money

SC Maintenance

SC Maintenance

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ecotourist said:
I trust Warren Buffett. Here are his comments on Private Equity.

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Funny you post this. Berkshire is a sort of public version of private equity - in that they buy entire companies as well, and you buy Berkshire.

My first thought on this article was if your PE deals are so wonderful and want 401K money, bundle them up and take them to market, just like Berkshire. Then anyone can invest.

But of course then the deal would need to see daylight, so won't happen.
 
Private equity by nature works by gaining influence to make management do what they want which is in their interest and not the company's or shareholders best interest and what better way to do that than by getting access to money to use to buy voting shares and possibly on leverage and gain control and make it to where they siphon all the cash out of that "investment" and leave everyone holding an empty bag and tell you it was not a guaranteed investment and that anything can happen so they walk away scot free making the rich richer and the poor poorer.
 
SC Maintenance said:
Funny you post this. Berkshire is a sort of public version of private equity - in that they buy entire companies as well, and you buy Berkshire.

My first thought on this article was if your PE deals are so wonderful and want 401K money, bundle them up and take them to market, just like Berkshire. Then anyone can invest.

But of course then the deal would need to see daylight, so won't happen.
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They buy companies with good management and keep it that way for the long term and rarely meddle with them. PE buys companies with whatever management as long as they see an opportunity to change it however they need to so they can get rich in the short term not caring about it crashing and burning when they make it go bankrupt.
 
As I understand Private Equity, they buy assets and over time value them themselves (or have them valued by trusted agents). There is lots of room for funny business there.

Berkshire buys assets (whole businesses whenever possible) and then investors value the whole of Berkshire. Do investors overvalue and undervalue whole companies/businesses? Of course they do, that's why there is trading on the stock market. But if you think the whole of Berkshire is undervalued, you should buy some shares. Or if you think the whole business will be worth more tomorrow, that's another reason to buy some shares. If it's overvalued, sell some shares.

It's not the same when a third party (the trusted agents) are telling us what the assets are worth.
 
Track records show most of the big businesses bought by PE ended up failing, not always caused by PE but most ended up raid, split, dump, and bankrupt. Having 401k being the last one holding the bag makes the real PE guys more money.

Stocks tend to grow over time in general, so do bonds, but PE is a pump and dump business usually and that usually won't end well for 401k.
 
SC Maintenance said:
Apollo, Blackrock, et al want access to your 401K. I am sure the 30% in their survey that responded that whey wanted access had zero idea what private equity even is.

Murky and illiquid deals managed by wall streets least trusted groups. What could possibly go wrong, / sarc

https://www.morningstar.com/news/ma...k-plans-highly-risky-for-the-average-investor
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Ha! just went to go read the link for this, not that I have any interest in letting PE into my 401k (although investing options are just that, options which may or may not be good to take, as part of a diversified portfolio), but got this instead:
1736791647738.webp
 
PandaBear said:
Track records show most of the big businesses bought by PE ended up failing, not always caused by PE but most ended up raid, split, dump, and bankrupt. Having 401k being the last one holding the bag makes the real PE guys more money.

Stocks tend to grow over time in general, so do bonds, but PE is a pump and dump business usually and that usually won't end well for 401k.
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Definitely a pump and dump.
 
Then they make whatever bad decisions they want and then get bailouts because nobody wants their 401k to jump off a cliff.
 
JavierH19 said:
They buy companies with good management and keep it that way for the long term and rarely meddle with them. PE buys companies with whatever management as long as they see an opportunity to change it however they need to so they can get rich in the short term not caring about it crashing and burning when they make it go bankrupt.
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In the case of Nevada Power, Berkshire bought a company that was squandering its guaranteed income on bad investments and ruinous executive pay rather than returning it to stockholders in the form of dividends or stock buybacks. Buffet bought the cheap stock then cleaned out the executive suite.
Unfortunately, ratepayers have gone from the frying pan into the fire. Buffett's goons are trying every trick in the book to squeeze the last dollar out of customers.
 
People always going to blame something. WB is a hypocrite, IMHO. Yes he is rich and was successful but he only needed to be correct most of the time,

I mean would you call BDC's "private equity"?
 
Pablo said:
People always going to blame something. WB is a hypocrite, IMHO. Yes he is rich and was successful but he only needed to be correct most of the time,

I mean would you call BDC's "private equity"?
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I don't understand your point. BDC's are not open to retail investors usually either? My limited understanding is they are more interested in investing in the debt not the equity But there are no rules so they can do whatever.

I really don't care if private equity - or a BDC, is available to retail. My concern is that its available in a 401K or pension. I think that is a bridge way too far for most people.
 
SC Maintenance said:
I don't understand your point. BDC's are not open to retail investors usually either? My limited understanding is they are more interested in investing in the debt not the equity But there are no rules so they can do whatever.

I really don't care if private equity - or a BDC, is available to retail. My concern is that its available in a 401K or pension. I think that is a bridge way too far for most people.
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My point is twofold. Private equity and BDC's are indeed different, but can have overlapping goals. Why should people not be able to buy BDC stocks from Brokeragelink 401K's? Money in a 401K is YOUR money. Period.

The other thing, private equity is not always evil - any more that WB is always evil.
 
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Pablo said:
My point is twofold. Private equity and BDC's are indeed different, but can have overlapping goals. Why should people not be able to buy BDC stocks from Brokeragelink 401K's? Money in a 401K is YOUR money. Period.

The other thing, private equity is not always evil - any more that WB is always evil.
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Its not your money - its your tax sheltered money. As long as its tax sheltered the government gets to make the rules to protect most of the public. Should a wall street no moral hazard managed fund provider be able to stuff granny's retirement account full of meme coins?

If you want to invest in non traditional things its easy. Take your 401K money out. People on this board are always complaining about the 401K rules. They don't want 401K's or IRA's. What they want is tax free status on their investments so they can run their private individual hedge fund. ie they want their cake and eat it too. Pension funds never had that ability either.
 
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