It’s Time to Let the Barbarians Into Our Pensions
Investments in private equity by individuals should be discriminating and force the industry into greater transparency and lower fees.
The barbarians want a slice of your pension fund.
Photographer: ullstein bild
To get John Authers' newsletter in your inbox every morning, sign up here.
Private equity has an image problem, going back at least as far as “Barbarians at the Gate,” the classic 1989 book and movie about corporate raiders jockeying to buy RJR Nabisco in a debt-fueled leveraged buyout. Today, private equity is connected in the public mind with avarice and job cuts. Mitt Romney’s career as the highly successful head of a private-equity firm did him harm when he ran for U.S. president in 2012.
And yet, pension funds are supposed to be long-term vehicles, which are able to hold on to very illiquid investments. They are also badly in need of some extra returns from somewhere, as the relentless mathematics of low-bond yields make it more and more expensive to buy an income in retirement. Meanwhile, the action in contemporary capitalism is famously leaving the public markets, and concentrating instead in the private markets. That is where the new breed of unicorns have chosen to make their homes, with companies as important and powerful as Airbnb and Uber choosing to remain private.