Pensions Prepare for Losses from Private Equity

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1. Pension funds have been hit hard by private equity firms’ investments in companies that they later sold off at a profit. In some cases, pension funds were forced to sell their stakes in these companies at a loss.

2. Private equity firms buy companies and then sell them off for a profit. But the profits go to the investors who put money into the deals, not the company’s workers.

3. Private equity firms often use debt to finance their deals. When the companies they invest in fail, the firms may try to force the companies to pay back the loans. If the companies can’t repay the loan, the firm takes over ownership of the company.

4. Private equity firms are now being investigated for possible insider trading. Many of the firms’ employees own stock in the companies they invest in. So if they know that a company is going to fail, they might sell their shares before the public does.

5. Private equity firms have become increasingly popular. Since the financial crisis, many banks have stopped lending to small businesses. That means fewer jobs for people who work in those industries.

6. Private equity firms have been criticized for using debt to take over struggling companies. Companies that borrow money to expand are less likely to layoff workers than companies that don’t borrow money.

7. Private equity firms have also been accused of taking advantage of smaller companies. Smaller companies tend to have weaker boards of directors, making it easier for the firms to control the board.

8. Private equity firms have recently faced criticism for paying out huge bonuses to executives even though the firms have failed.

9. Private equity firms have sometimes been accused of buying companies just to shut them down.

10. Private equity firms have taken over companies that make products that consumers no longer want. For example, private equity firms took over General Motors’ car parts division in 2006.

11. Private equity firms have bought companies that produce things like steel and coal. Then they closed the factories and laid off workers.

12. Private equity firms have invested in companies that provide services to hospitals. Then they tried to raise prices.

13. Private equity firms have acquired companies that make medical devices. Then they raised prices.

14. Private equity firms have purchased companies that make food. Then they raised prices and cut costs.