Trump DOL and SEC control agencies say allowing the 401k to bet on personal equity investments 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: Allocating 401,000 assets to the highest, most threatening, most dangerous, least liquid, and least transparent investments ever devised through Wall Street will reveal to staff a greater threat of losses in the existing pandemic and currency crisis than accompanies her. The resulting currency effect has triggered takeover bids from personal equity investors and has broken up 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 could get relief from COVID, but they are 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 companies and opted to maintain investments.
PitchBook noted that “venture capital firms drastically reduced portfolio companies at the time of the 2020 quarter” and:
“Strong borrowing and the pandemic crisis have led to the bankruptcy of several holding corporations. Other portfolio corporations can follow this path, as rating agencies have downgraded the ratings of many PE-backed corporations. The EP’s waiting times are likely to be increasing as we saw the global currency crisis, and sponsors delay its publication until the long term is 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 about 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 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 advisor, and compliance director at 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 pension plans 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 largest SEC whistleblower award in history ($48 million) and in 2018 the largest CFTC award in history ($30 million).