How Sovereign Wealth Funds Threaten Capitalism
By underwriting more private investments, the funds risk hollowing out public markets.
Wall Street.
Photographer: Michael Nagle/BloombergPrivate equity has become the return-boosting investment class of choice for many asset managers in recent years, for all the accusations that buyers are overpaying for deals amid an overleveraged bull market. But could the shift away from public markets have a potentially more sinister outcome than luring yield-hungry funds into overpriced unlisted investments? Could it pose a threat to capitalism itself?
Martin Gilbert, vice chairman of Standard Life Aberdeen Plc, told Bloomberg Television earlier this week that asset owners are making “quite a big shift” to private equities from public markets. He estimates that the percentage of the world’s assets in non-public markets will climb to 20 percent from about 15 percent currently.