[superxpro12]

As someone who's life is currently being affected directly by PE middle-manning something I spend a LOT of time on, I am sensitive to this issue.

IF you have problems with the vocab and terms, fine. But I have seen personally this issue in my life, that is affecting my bank account.

And we have seen example after example of these LBO's ruining otherwise functioning businesses. It's happening. All over the place.

[mbesto]

> And we have seen example after example of these LBO's ruining otherwise functioning businesses. It's happening. All over the place.

Your anecdotes and the anecdotes in media are no statistical evidence for "this is happening all over the place".

Yes, PEs/LBOs deserves criticism, but "PE" and "LBO" isn't a one size fits all situation.

[pembrook]

It is absolutely possible (and even likely!) that a bad PE fund was the cause of the issue you're talking about. But there is also a media hysteria around PE, and a lack of understanding among the general public of what it is.

It's just as likely the business that was acquired was already failing or unsustainable to begin with (hence why the owner wanted out at low multiples). LBO funds don't acquire promising businesses at 5-10X revenue like tech companies do, they usually buy businesses at low multiples that are past their prime or failing in an attempt to revitalize them (with debt, since you can't raise capital by selling equity in a failing business).

Obviously this will not always work out great, given the trajectory of target companies was already not great to begin with. Momentum is the strongest factor in all markets.

The problem is, Private Equity has become a conspiratorial catchall boogieman and scapegoat for every problem under the sun, so it's hard for me to assess without further details of the situation.

[maest]

> Momentum is the strongest factor in all markets

Nit: beta is the strongest factor in all markets. Which is actually relevant for the success for PE funds in general, as a rising tide lifts all boats and people taking on debt to finance equity generally post outsized returns in bull markets.

Anyway, the rest of the stuff you're saying I agree with.

[pembrook]

Yes, beta is the overwhelming source of returns. I was referring to factors in the sense of the University of Chicago research on market inefficiencies (where momentum is the strongest factor for inefficiency).

If you buy a “factor-weighted” etf the idea is it’s tilting you into those “factors” away from pure beta like buying whole market.

PE you could argue is largely just leverage plus an illiquidity factor play, since if PE just returned beta (which these days it might!) you’d be smarter to buy the S&P500 with equivalent leverage and not pay crazy fees.