Jan 28, 2020

Private equity should breathe a sigh of relief as Sanders surges

Photo Illustration: Sarah Grillo/Axios. Photo: Robyn Beck/AFP via Getty Images

Bernie Sanders has opened up leads in both Iowa and New Hampshire, according to most recent polls.

The big picture: Private equity might be hyperventilating into a paper bag, but it should be breathing a sigh of relief. At least temporarily.

The state of play: Buyout firms face an existential threat from either a Sanders or Warren presidency, but much more of a rhetorical threat from Warren's campaign.

  • Sanders wants to largely dismantle modern capitalism, which would include private equity. In short, burn down the house and rebuild from scratch.
  • Warren wants to "fix" modern capitalism, believing private equity is one of its most broken pieces. A remodel with private equity in the driveway dumpster.

Between the lines: If Sanders were to win the nomination, or remain a contender until the final primaries, it's unlikely that he'll mention private equity very often (outside of generalist broadsides against Wall Street and the 1%).

  • Warren, on the other hand, would keep hammering private equity hard, particularly if and when we get the next brand-name bankruptcy or Taylor Swift tweet.
  • Industry-specific rhetoric matters because, no matter the president, it can filter down into legislative perceptions and policies (including at the state and local levels).

The bottom line: Again, my needle-threading argument isn't about the ultimate White House winner. Private equity should fear both Sanders and Warren in the Oval. But if only one of them can remain viable for longer before falling, then buyout barons should hope for the self-described Democratic socialist.

Go deeper: Private equity firms fear a Democrat topping Trump in 2020

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Private equity returns fell behind stocks over the past decade

Illustration: Aïda Amer/Axios

U.S. private equity returns fell just below S&P 500 returns for the 10-year period ending last June, according to a report released Monday morning by Bain & Company.

Why it matters: Private equity markets itself as beating public markets over long-term time horizons, and usually providing an illiquidity premium to boot. These new performance figures not only dent such claims, but provide fresh ammunition to critics of public pension investment in private equity funds.

Private equity's slow creep into doctors' offices

Photo: Thomas Barwick/Getty Images

Private-equity firms accelerated their acquisitions of doctors' practices between 2013 and 2016, according to a new JAMA study.

Why it matters: "Private equity firms expect greater than 20% annual returns, and these financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety," the author writes.

Go deeperArrowFeb 19, 2020 - Health

What the top Democrats are offering the world

Photo Illustration: Sarah Grillo/Axios. Photos: Joshua Lott/Getty Images, David McNew/Getty Images, and Mario Tama/Getty Images

If a Democrat wins back the White House in 2020, they'll face steep obstacles to turning their domestic agenda into reality.

But, but, but: In foreign affairs, particularly when crises arise, they will wield immense power.

Go deeperArrowJan 28, 2020