Tuesday 24 January 2017

Not So Merry Go Round

You may wonder why in a world where a trillion here or a trillion there does not seem to matter too much, while many of us and our governments etc. seem to be so chronically short of the readies.

What is a greater mystery is why some of the figures seem to be fine and dandy and moving in the right direction, so much is going in  opposite direction and never to return.

One major explanation is here in the LSE Business in a full article on Private Equity and the way money is moved these days, by whom and to what purpose.

It may make the eyes ache at times but if you can take it, you will have learned something useful. It is titled: "How Private Equity Firms Are Designed To Earn Big While Risking Little Of Their Own".

This is the way it ends, quote:


The PE business model is designed to funnel income from portfolio companies and PE funds upwards to the PE firm. With so little of their own money at risk, these firms make outsized bets that pay off in good times.

In bad times, they make money on the steep management fees paid by investors and monitoring fees paid by portfolio companies. Like the house in a casino, PE firms never lose.

One example is that just about anyone with a leasehold property will playing in the game only picked for the losing side.

1 comment: