The SEC gets into the sales business, promoting the idea of retail investors putting money into private equity. This is a bad move.
Or, at least, be better able to survive when an investment came crashing down.
This wasn’t the first word from the current administration about it. On June 3, the Department of Labor interpreted a May executive order of Donald Trump to mean thatA short trip down memory and financial lane—pension plans typically need stable investment vehicles. The money absolutely must be there in future years when people retire. Otherwise, their futures have been flushed down the tubes.
The increased risk makes sense because PE is supposed to provide high returns, and that doesn’t come for free. However, it means that there are stronger chances to lose big. PE is also typically opaque. You can’t easily see the strategy, which means investing on faith—not wise.management fees run on average from 1.5% to 1.75%
More importantly, though, PE has a deleterious effect on the economy. Although there are exceptions, the model is too often predatory. A PE company will buy or invest in a business and then attach itself like a lamprey, absorbing value and draining strength from the company.
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