The Trump DOL and SEC watchdogs say allowing 401ks to bet on personal equity investments for the first time will help staff “overcome the effects of the coronavirus on our economy. ” 401k investors, don’t say a word. Most likely, deprived wolves will depend 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 justice, which increases prices and dangers for 401k savers, will cause staff to “overcome the effects of coronavirus on our economy. “
401k as “COVID relief” for workers’ retirements?
One thing is for sure: Allocating 401,000 assets to the highest, most threatening, threatening, least liquid, and least transparent investments ever devised via Wall Street will reveal a new threat of losses in the existing pandemic and accompanying currency crisis. Currency spin-offs led to takeover bids from personal equity investors and bankrupt many personal equity holding companies.
Why would Trump’s DOL and SEC push to put their 401,000 savings into 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 as corporations have slashed holding companies and chosen to hold investments.
PitchBook noted that “venture capital firms reduced their portfolios in the quarter of 2020” and:
“Heavy debt and the pandemic crisis have bankrupted several portfolio corporations. Other portfolio corporations may keep up, as rating agencies have downgraded many of the PE-backed corporations. The deadlines for MEPs, as we saw in the global monetary crisis, are likely to increase, with sponsors postponing their departure until the long term becomes clearer.
The International Finance Corporation also noted that the negative effect of COVID-19 on private equity funds, i. e. in emerging markets, due to lower activity and expansion of clients of fund portfolio companies.
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 . . . IFC noted that in the short term, the return on PE funds in emerging markets will be greatly affected due to significant impairments 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 “[t]he end of the day, investors are preparing for greater volatility, rebates and defaults”with personal capital.
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 Cash Control Sam Spade,” “the money watchdog” and “the pension detective. “Born Edward Ahmed Hamilton Siedle, I grew up in Trinidad, Venezuela, Panama, Peru, England, Uganda, Egypt, and the US. But it’s not the first time I’m a former SEC attorney, former legal assistant and compliance director of 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 trillion in forensic investigations into the money control industry. I am identified nationally as an authority on pensions and investment control, having testified before the Senate Banking Committee about mutual fund scandals and as an expert in litigation against Madoff and others. I am an active member of the Florida Bar Association. In 2017, I received the highest SEC whistleblower award in history ($48 million), and in 2018, the highest CFTC award in history ($30 million).