(This article was originally published with the name “Should the 401ks rush to alleviate the COVID of private capital wolves?)
Trump DOL and SEC watchdogs say allowing the 401k to bet on investments of personal equity for the first time will help staff “overcome the effects of coronavirus on our economy. “401k investors, don’t say a word. Private wolves will most likely rely on 401,000 lambs to provide COVID relief to their troubled funds.
Last summer, Trump’s Department of Labor opened the door for plan sponsors to load the personal equity budget into their 401 (k) plans. Trump’s SEC President Jay Clayton clapped from the bench. about $9 trillion.
The explanation provided through the DOL for its reckless action is astonishing.
The game of personal equity – expanding prices and dangers for savers 401k – will cause staff to “overcome the effects of coronavirus on our economy”.
401k as “COVID relief” for workers’ retirements?
One thing is for sure: the allocation of 401,000 assets to the most threatening, threatening, less liquid and least transparent maximum investments ever designed across Wall Street will reveal to staff a greater threat of losses in the existing pandemic and the accompanying monetary crisis. the resulting monetary effect has led to public offerings to acquire personal equity investors and has broken down many personal equity portfolio companies.
Why would Trump’s DOL and SEC push to invest 401,000 savings in that dictated budget when existing investors are suffering to buy back, to get out?
Someone might get relief from COVID, but it’s not personal like you.
One commentator, PitchBook, recently noted that equity in exit activity in the second quarter of 2020 has collapsed because corporations have drastically reduced holding corporations and have chosen to maintain investments.
PitchBook noted that “venture capital drastically reduced its portfolios at the time of the 2020 quarter” and:
“Strong debt and the pandemic crisis have forced several portfolio corporations into bankruptcy. Other portfolio corporations may simply stick to rating agencies lowering the ratings of many PE-backed corporations. The timing of PE tenure is probably piling up as we saw the global currency crisis, with sponsors postponing its exit until the long run becomes clearer.
The International Finance Corporation also noted the negative effect of COVID-19 on private equity funds, mainly in emerging markets, due to lower activity and expansion of clients of companies in the fund portfolio.
The IFC notes that the pandemic affects short-term (one-year) and medium-term (two- to three-year) expansion clients of fund portfolio companies, sometimes negative effects on profits, prices and profitability. greater aversion to threats can lead to a sharp expansion of indebtedness, bankruptcies and defaults. “The combination of shocks that reduce the availability of gains and shocks of origin that alter global price chains has an effect on entire industries and sectors . . . that in the short term, the return on PE funds in emerging markets will be greatly affected due to significant deteriorations in portfolio valuations, exchange rate volatility and investment challenges.
McKinsey also noted in a recent article that the overall EP portfolio had declined by approximately 20%. McKinsey noted that approximately 50% of the assets under control in the sector are in vulnerable sectors and concluded that “ultimately investors are preparing for greater volatility, rebates and defaults “with personal equity.
Another McKinsey report noted that the assessments in the midst of the pandemic “[w] or most . . . they are weaker because business performance, at a time when demand is collapsing, is volatile and multiple public movements are volatile,” and PE outputs have “practically stopped” due to the pandemic.
Bathtub
Bain ad that yields will be delayed in the event of a recession because market price valuation calculations are fast and that it is “difficult to evaluate companies in this environment, given the disruption of corporate money flows, market volatility and lack of comparable transactions”. “
In an environment of “greater threat aversion,” as the IFC has pointed out, it is indefensible to inspire bets on its already abused 401,000 personal equity savings. Calling it “COVID relief” is reprehensible.
I called ‘the Sam Spade of cash management’, ‘the money watchdog’ and ‘the pension detective’. Born Edward Ahmed Hamilton Siedle, I grew up in Trinidad,
I’ve been called “the Sam Spade of cash control,” “the monetary watchdog,” and “the pension detective. ” Born Edward Ahmed Hamilton Siedle, I grew up in Trinidad, Venezuela, Panama, Peru, England, Uganda, Egypt, and the US I am a former SEC attorney, former legal counsel and chief compliance officer for Putnam Investments. For more than 20 years, I have owned securities trading companies and investment banks. My firm, Benchmark Financial Services, Inc. , and I have pioneered more than $ 1 billion in forensic investigations in the currency control industry. I am nationally identified as an authority on pensions and investment control, having testified before the Senate Banking Committee on the mutual fund scandals and as an expert in litigation against Madoff and others. I am an active member of the Florida Bar. In 2017, I received the largest SEC whistleblower award in history ($ 48 million), and in 2018, the largest CFTC award in history ($ 30 million).