Big-Time Funds Should Be Able to Stand Some Light
Online brokers like Robinhood Markets Inc. and crypto assets might get the headlines, but the Securities and Exchange Commission’s parallel effort to drag private-equity firms and hedge funds out of the shadows will have far more impact on far more lives.
Private equity especially has exploded in power and reach in the past decade. That’s why SEC Chair Gary Gensler is right to start demanding higher governance standards and more transparency from these firms. Any fund whose returns are destroyed by some extra reporting costs and duties shouldn’t be in business.
The industry has more than $4 trillion in assets under management and in the U.S., private-equity backed companies employ about 11.5 million people, according to data from the American Investment Council, a body that serves the interests of private equity. For comparison, America’s largest commercial employer, Walmart Inc., has about 2.3 million staff.
After a record year of dealmaking in 2021, where private-equity transactions accounted for nearly a quarter of the $5 trillion in total mergers and acquisitions, the industry’s influence will continue to grow. Buyout funds have about $2 trillion to spend if you include the debt they can use for deals. Some bankers think the first $50 billion buyout isn’t far away. The $34 billion takeover of Medline Industries Inc. last year was the biggest since the 2008 crisis and among the biggest ever.