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If you had $10 billion in cash and had to allocate it, how much would you put in private equity? What is your incentive? I see the appeal to private equity as

If you had $10 billion in cash and had to allocate it, how much would you put in private equity? What is your incentive? I see the appeal to private equity as a walled garden. Only elites get to invest in startups, and keeping the masses out keeps prices down (supply and demand). Depending on your outlook, you could say public markets are a bit of a ponzi scheme too. So dumping your private equity out onto the market with an exit lets you get in at the beginning of the scheme. Another big win. The author says there are too many people in PE and the premiums are too high, but relative to public equity, I am really not sure. The author also mentions how bad the liquidity is, and that should also move prices down even further. So as far as economic opportunity it still seems like a good deal. That being said, if I actually had $10 billion, I still don't think I would put more than 5% in because of how often startups fail and how bad the liquidity is.

chrisgd 4y ago
Private equity generally buys EBITDa positive businesses from each other and founders. Highly unlikely PE marks many investments to 0, rather just less than purchase price.
nl 4y ago
Venture capital is only a small part of PE.
missedthecue 4y ago
"Only elites get to invest in startups" Most VC firms are backed by institutional money, like pension funds. This is money owned by every Tom, Dick and Harry. Not elites. It's managed by purported experts, but the money and the profits will go to average joe.
- anm89 4y ago
  This is empirically not true when you look at the data on who owns financial assets in America. The "average person" owns essentially no financial assets. The median person especially owns approaching zero financial assets. The top 10% and then again the top 1% own a drastically disproportionate share. The one exception is Pensions and 401ks but this does not even come close to skewing the math in terms of "normal people" owning a significant portion of financial assets. All US pensions and 401ks combined have a total value of something like 10T. And that's before the fact that a huge value of the 401ks are still held by the top %s. And that's aside from the fact that a lot of US pensions are in deep deep shit right now and may never pay out even close to face value on their obligations as denominated in 2023 dollars.
  - danielmarkbruce 4y ago
    https://fred.stlouisfed.org/series/BOGZ1FL594090005Q https://fred.stlouisfed.org/series/BOGZ1FL594090005Q 25 trill of pension assets in the US. It's a lot. It's money for teachers, police, other government workers, all kinds of regular folks. Many of them don't know where the money goes and it's not legally theirs, but it's legally owned by an entity which has obligations to them, so it's almost as good as theirs.

chrisgd 4y ago

Private equity generally buys EBITDa positive businesses from each other and founders. Highly unlikely PE marks many investments to 0, rather just less than purchase price.

nl 4y ago

Venture capital is only a small part of PE.

missedthecue 4y ago

"Only elites get to invest in startups" Most VC firms are backed by institutional money, like pension funds. This is money owned by every Tom, Dick and Harry. Not elites. It's managed by purported experts, but the money and the profits will go to average joe.

anm89 4y ago
This is empirically not true when you look at the data on who owns financial assets in America. The "average person" owns essentially no financial assets. The median person especially owns approaching zero financial assets. The top 10% and then again the top 1% own a drastically disproportionate share. The one exception is Pensions and 401ks but this does not even come close to skewing the math in terms of "normal people" owning a significant portion of financial assets. All US pensions and 401ks combined have a total value of something like 10T. And that's before the fact that a huge value of the 401ks are still held by the top %s. And that's aside from the fact that a lot of US pensions are in deep deep shit right now and may never pay out even close to face value on their obligations as denominated in 2023 dollars.
- danielmarkbruce 4y ago
  https://fred.stlouisfed.org/series/BOGZ1FL594090005Q https://fred.stlouisfed.org/series/BOGZ1FL594090005Q 25 trill of pension assets in the US. It's a lot. It's money for teachers, police, other government workers, all kinds of regular folks. Many of them don't know where the money goes and it's not legally theirs, but it's legally owned by an entity which has obligations to them, so it's almost as good as theirs.