THE SET-UP: One of the easiest laws to break is the law of unintended consequences … particularly when the perpetrator is guilty of hubris.
Enter a hubris-fueled Trump.
He broke that law when he started a multi-front trade war. Now tourism is crashing, snowbirds are fleeing Florida, Brazil is selling soybeans to China, investors are moving their money to Europe and Africa, and retailers anticipate covid-like disruptions to a supply chain now showing signs of Trump-induced brokenness.
Perhaps Trump anticipated a few of these consequences.
But then again, probably not.
He’s been drinking his own Kool-Aid on trade and tariffs for decades. The blatherati often say he’s right on the diagnosis of the problem, but wrong about the application of his solution. But that’s not true. He claims foreign powers have “stolen” America’s factories and jobs and wealth. That’s patently false. The Chinese Communist Party didn’t surreptitiously come in the dead of night and steal Ohio’s manufacturing jobs. American corporations and investors SENT those jobs overseas so they could maximize profits and hoard more wealth.
Walmart led the charge to China’s cheap labor and lax regulations. Every major retailer and consumer product-maker followed. And, at the same time, Big Ag was instrumental in pushing NAFTA and, thanks to its cheaper corn, it pushed small farmers off the land in Mexico and, as it happens, into an “illegal” pipeline that delivered cheap labor to their US-based farms and slaughterhouses.
Now, being the Dunning-Kruger Effect genius-he-thinks-he-is, Trump is attempting to remake the economy based on a flawed and anachronistic premise. He’s punishing the wrong perpetrator and, in the process, he’s also inflicting further pain on the "victim” he claims to be championing … the American consumer. And if manufacturing returns to the US, it will likely rely on the highly automated robotic manufacturing systems that China leads the world in developing and deploying. Or it will rely on immigrants willing to do tedious, repetitive work on production lines and in front of sewing machines.
All of which highlights the real problem—I don’t think he understand economics. I don’t even think he understands business. I think he understands the tax code (and how to game it) and I think he’s great at marketing. If you look back at all his business failures … they all started with great marketing. All of his successes, however short-lived, are just examples of effective marketing and branding … because he’s a salesman, not an economist or a financial wizard. Trump may be the living embodiment of “ABC” from Glengarry Glen Ross … “Always Be Closing.”
That’s all he’s ever doing in business, in politics and in life … he’s perpetually marketing himself as a product and closing the sale. That’s why he held a rally in Michigan to sell his first hundred days. Early on in his remarks, he admitted that he missed the campaign trail. That’s what makes him go.
In many ways, we’ve been collectively trapped in a perpetual time-share sales-pitch with the world’s most relentless salesman. And this all might be the unintended consequence of first electing a Brylcreem-coiffed B-Movie actor and General Electric pitchman who ran on “Making America Great Again.” That we ended-up stuck in a room with a strangely-coiffed gameshow host pitchman-president might be our just desserts for the display of hubris that kicked-off the 1980s. Now, those of us unwilling to buy into a two-bedroom condo near the water in Vero Beach or Acapulco are left looking for some consolation. Perhaps private equity’s disappointment will work in lieu of a year’s supply of Turtle Wax? Whether we like it or not, it will have to do. - jp
TITLE: KKR says Europe enjoying ‘renaissance’ after Trump unleashes tariffs
https://www.ft.com/content/3e2601b2-a17a-4fbb-87d8-b40262bfaed6
EXCERPTS: Europe is experiencing a renaissance as an investment destination according to a top executive at private equity firm KKR, in light of sweeping US tariffs — a step-change in public spending plans and proposed competitiveness reforms on the continent.
“As a consequence of things like the Draghi report [on competitiveness] and tariffs, Europe’s undergoing a bit of a renaissance,” said Tara Davies, co-head of Europe at the US alternative investment group.
There was now “a real focus on self-reliance and reshaping of the economic model more generally”, she told the Financial Times. Germany’s recently announced €500bn infrastructure fund showed there was “a real push to spend where it’s meaningful for growth”, she added.
The comments come after a month in which US President Donald Trump announced substantial import taxes, before lowering them for 90 days for almost every country except China in the wake of market sell-offs. The lack of clarity has led some key global investors to halt commitments to private markets in the US.
The FT reported earlier this month that Chinese state-backed funds have been pulling back from investing in the funds of US-headquartered private capital firms following Trump’s tariff rhetoric.
TITLE: The Trump era has been a bust for private equity—that’s one reason PE is turning to retail
https://fortune.com/article/private-equity-deals-fundraising-blackstone-wealth-products-private-markets-etfs-401ks-vanguard-apollo-global-carlyle-group/
EXCERPTS: In the past, only the super wealthy and institutional investors, like pension funds, insurance companies and sovereign wealth funds, could get a piece of [Private Equity (PE)]. Since 2017, though, private equity firms—which now call themselves alternative asset managers—have launched more than 400 funds with flexible structures and lower minimums—as low as $500 in some cases. Recently, the pace of these offerings has accelerated, offering unprecedented opportunities for small investors to access PE-style investments like private credit, real estate, and infrastructure, according to data from investment manager Hamilton Lane.
The reality is PE firms are hunting for new sources of potential capital. In 2024, buyout funds raised 23% less capital globally than the prior year, which was already a slow time period for fundraising, according to Bain & Co’s Private Equity Outlook 2025: Is Recovery Starting to Take Shape?
The situation grew even more dire in April with the introduction of President Trump’s Liberation Day tariffs, which caused the U.S. stock market to lose trillions in value. The volatility helped put IPOs and many deals on pause. This means private equity will have little opportunity to sell its investments, making it harder to return money to investors and causing fundraising to freeze further, one [Limited Partner (LP)] said.
Giving individual investors the opportunity to invest in PE funds presents “a massive, massive untapped part of the market,” said Drew Schardt, vice chairman and head of investment strategy at Hamilton Lane.
Proponents claim that individual investors would do well to invest in private markets, not least because of the big returns delivered by PE firms. Global private equity generated a 13.4% return for the 20 years ended Sept. 30, 2024, compared to an 8.9% return for the global public equity MSCI ACWI PME Index for the same time period, according to Vanguard 2025 private equity market outlook.
While the returns are significant, they are overshadowed by the lucrative fees charged by private equity funds. Investors, or LPs, of these pools of capital pay fees, which go to the general partners for managing the funds. Funds charge performance fees, known as the “2 and 20”, which are a 2% annual management fee plus a 20% incentive fees. The 2% annual management fee covers the ongoing expenses of running a fund like rent and salaries. If a fund does well, and generates a profit for investors, the LPs get the 2% management fee back. The PE execs also receive a 20% share of the profits, known as “the carry,” generated by the pool. PE executives, particularly partners and managing directors, typically make most of their compensation from the carry, especially if they have a successful fund. (Conversely, if a fund does badly, the LPs don’t get the 2% back and PE execs don’t get carry.)
Private equity is more expensive than investing in ETFs but the returns are also potentially much bigger, although on a longer time period. It’s not uncommon for PE firms to double or triple their investment when a deal does well. That said, investors can also lose money very quickly.
Stephen Amdur, global leader of Pillsbury’s mergers & acquisitions and private equity practices, thinks private market products can be a viable option for certain individual investors. Amdur pointed to retirement savers, or persons who actively allocate a chunk of their income to retirement accounts like 401(k)s, or IRAs or other vehicles. For these individuals, who are used to not getting their money back for years or even decades, as well as sophisticated investors, private market products can be a great investment alternative, he said. Amdur is cautious about everyone else. “The SEC’s historical accreditation rules were done for a reason,” he said.
Regulators are concerned about providing access to private market products to unsophisticated investors, who may not understand the longer hold periods or have access to advisors who can explain the complex investments, he said. “Investors are going to need to recognize that, for the most part, they’re not going to be able to jump in and out of [private market] funds with a click of a button on Robinhood,” Amdur said.
TITLE: Private Equity’s Do-or-Die Moment
https://prospect.org/power/2025-04-29-private-equitys-do-or-die-moment/
EXCERPTS: The year 1978 is not just noteworthy for the election of Pope John Paul II and National Lampoon’s Animal House. It was also the year that a little investment banking firm known as Kohlberg Kravis Roberts announced plans to take manufacturing conglomerate Houdaille Industries private through a leveraged deal, using the company’s assets and future cash flows as collateral to secure debt financing for the acquisition. Although KKR had completed three smaller deals the year before, its acquisition of Houdaille was the first leveraged buyout of a public company in modern history.
The successful deal set the stage for KKR’s rapid expansion into the 1980s and beyond. Today, KKR is a publicly traded investment firm with $638 billion in assets under management. Despite some initial skepticism, Wall Street would go on to follow in the firm’s footsteps. Such financial engineering has become a staple of the private equity industry.
The private equity industry is teetering on the edge of its former glory. Dealmaking has been glacial, tariff-induced market turmoil has upended exit plans (or sales of the portfolio companies), setting prices for acquisitions has been impossible due to the uncertain economic environment, and bankruptcies at private equity–owned companies soared to record levels last year. Moreover, cash-strapped institutional investors have been exploring ways to shed some of their private equity exposure. That includes endowments at universities that are under pressure due to Trump’s attempts to deny them federal funding. Yale’s endowment, one of the first to enter private equity investments, has been considering exits.
These challenges mean that the industry will have to get creative. It remains unclear the extent to which private equity can successfully manufacture favorable profitability outcomes through financial engineering, but as [Brendan Ballou, former special counsel for private equity in the Justice Department’s Antitrust Division and author of Plunder: Private Equity’s Plan to Pillage America], noted, these firms “are generally out for themselves.”
“One could see them leaning on their portfolio companies to extract as many fees as they can while they still can … to increase profitability in the short term, even if it sacrifices profitability in the long term, in order to try to get a better valuation on some of these businesses and offload them,” he told the Prospect.
When it comes to ensuring competition, regulators have established a new framework for reviewing mergers and acquisitions. The 2023 Merger Guidelines, a nonbinding directive published by the Justice Department and FTC during the Biden administration, have significant implications for the private equity industry. Although the directive does not explicitly mention private equity, it highlights the many ways in which enforcers intend to remedy the industry’s anti-competitive business practices.
In a September 2023 op-ed for the Financial Times, former FTC chair Lina Khan described the 2023 Merger Guidelines as “a handbook for how market participants should understand the analytical tools and frameworks we apply when assessing whether a deal violates the law,” adding that one of the guidelines details how enforcers “can examine whether a firm’s pattern or strategy of multiple acquisitions risks substantially lessening competition or tending to create a monopoly.”
The vigorous antitrust enforcement regulators have pursued since the Biden administration has persisted under President Trump, for now. Notably, the Trump administration agreed to maintain the 2023 Merger Guidelines earlier this year. But how long will this unusual continuity last?
In one sense, what the feds decide won’t completely let private equity off the hook, Ballou said. “In a world where federal regulators are not particularly interested in antitrust enforcement in private equity, that responsibility is going to fall to the states, which have the authority to pursue or to enforce federal antitrust laws. I think that’s probably where a lot of the energy is going to be.”
The FTC has continued to crack down on anti-competitive conduct by private equity firms under the Trump administration, by challenging a medical device rollup. Despite this, the uncertain future of antitrust enforcement at the federal level increases the likelihood that states will need to step up efforts to check corporate power.
“One of the basic problems we’ve got with private equity is we have a disconnect between private equity firms having operational control over their businesses but very little legal or financial responsibility for when bad things happen with those businesses,” Ballou told the Prospect. “State legislatures can help change that.”
States have been fixated on private equity’s involvement in health care for obvious reasons, but rollups by these firms are playing out across a range of sectors. The industry’s iron grip on the U.S. economy and the problems that come with it are not going away.