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PRIVATE EQUITY & HEDGE FUNDS

PRIVATE EQUITY & HEDGE FUNDS. A New Global Strategy - A First Step -. By Poul Nyrup Rasmussen. Party of European Socialists. We need capital markets to finance our investments. Real Economy & Investments. Financial Markets HFs & PEs. Cost effective? Transparent and accountable

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PRIVATE EQUITY & HEDGE FUNDS

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  1. PRIVATE EQUITY & HEDGE FUNDS A New Global Strategy - A First Step - By Poul Nyrup Rasmussen Party of European Socialists

  2. We need capital markets to finance our investments Real Economy& Investments Financial MarketsHFs & PEs • Cost effective? • Transparent and accountable • Long-term financing? • Companies better off? • Respecting company values? • Social partners? Not subordinated any longer

  3. The debt and culture of extraction Higher returns % Tax deductions Fewer invest-ments Debt Overburdened credit markets IMF : High risk of distressed companies

  4. ”Financial engineering” Stressed companies (“efficiencies”) Returns Tax evasion Business cycles ”Debt push down” “Recaps”

  5. Better than others ? • Ludovic Phalippou & Maurizio Zollo University of Amsterdam: “Net returns – adjusted for management fees and methodological errors – 3,8% below the stock market”. • The World’s largest pension fund CalPERS: Picking the winners? Since 1990 invested in 257 funds – 107 has given a negative return!

  6. Our own money • For the partners • Fees/ trans.costs • ”Carry” (20%) • Equal share (8%) Capital Commit-ments (40%) 6-8 years • Black Box • Buy-outs • Debt • Asset-stripping For pension funds The rest On top: 2% fees for the partners - each year!

  7. I. What to do? • Transparency and disclosure to ensure financial stability • Setting up limits of leverage to lower the risk of default and not undermine firms • Effective taxation • Managing “Conflict of interest”

  8. II. What to do? • Pension funds unite!Make new ethical claims • Workers rights and info as in other take-overs. Need to be consulted and informed • Respecting collective bargaining, information and consultation • We don’t have to wait for a new world government!

  9. Legislators Labour market Re-balancing PE & HF Industry Pension funds Trade Unions It’s about changing behaviour

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