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by bko
1066 days ago
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Pension funds are investors in PE, they're not the debtors. In other words, if PE firms do well, their investors (pension funds) do well. They're also not stupid This whole conversation about PE is non-sensical. It's all based on this naive notion that PE firms borrow money to buy investments and use that money to pay themselves, more often than not bankrupting the original company, and since it was borrowed money, they can come out unscathed. But no one can answer, why would anyone lend PE firms money if it's a bad investment? Debt normally doesn't have an upside. Best case scenario is you get paid back what you're owed plus interest. A lot of online criticism can't even get the relevant players right and relies on naive tropes like "they're greedy" or "corruption", as a hand-wavy way to explain complicated dynamics. And then they throw out theories that could be dispelled by reading the first few paragraphs on investopedia regarding PE firms. Why is the discourse in this particular field so poor on hacker news? Low quality conversations regarding technical topics would not fly on this forum. If someone mentioned Y2K and you made a low quality comment like "greedy corporations wanted to save money by not storing more than 2 digits for the year", you would get downvoted to hell. So why does this topic have such poor comments? |
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Remember the housing crisis? As long as you can align the debt with an appropriate tranche, institutional investors like diversification and risk (in that part of the portfolio).
Also, these types of debt can make money in the short term. My father in law bought a beach house with a KMart bond trade. After they emerged from bankruptcy, everything was great! (Lol)