Private equity
Private equity refers to the non-public ownership of equity. As such the organization is not listed on a stock exchange and is not regulated like public mutual funds.
Private Equity Funds are usually open to institution funds (i.e. public and private pension funds) as well as high net-worth individuals who can afford a large buy in cost, and can be quite risky placing large sums of money to buy out companies (such as the Chrysler Group) and then either turn them around. Accurate return data must be provided to investors and prospective investors per existing law (i.e. pre Dodd Frank), but it can be difficult for the general public to determine the return of a private equity fund because they do not have to provide public reports. The Dodd-Frank Act alleges that reporting that was already happening to investors will become more standardized, but in fact, all Dodd-Frank will do is raise compliance costs for funds. Some investors have made as much as 30% per year.
Two of the largest private equity firms are Blackstone and Apollo Global Management, both of which are prominent in promoting self-serving globalism. Apollo added Anti-Trumper Pat Toomey to its board of directors within two months of his early retirement from the U.S. Senate at age only about 60, and Blackstone's co-founder Stephen Schwarzman announced his opposition to Trump for president in 2024. Funds from Apollo enables the leading bid for the taxpayer-subsidized NFL team Washington Commanders.
Criticism
As explained by a spot-on article in Mother Jones, private equity is "a $7.3 trillion industry that touches basically everything in your life, and it’s growth has had serious consequences for workers, patients, and consumers."[1] Private equity exploits a notorious "carried interest" tax loophole, and senators who have prevented its repeal have subsequently joined private equity firms benefiting from it, as anti-Trump Pat Toomey did in 2023 after being an "all-star" in protecting the tax dodge against efforts by Trump to repeal it.[1]
Preferential capital gains tax treatment should be available only for personal assets that are at risk of loss as well as gain, but managers of private equity exploit this far lower tax rate for most of their compensation without having their personal assets at risk.
Critics point out that private equity firms are run by shrewd people who are skilled at exploitation, without adding any real value. Trump and many others aware of private equity firms dislike them for subtracting rather than adding value. “These are guys that shift paper around and they get lucky,” Trump said in criticism of private equity managers and their special tax break on compensation.[2]
Even an owner in a new Italian soccer league opposes selling an interest in his league to a private equity firm, despite how Goldman Sachs, Searchlight Capital, and Apollo Global Management have shown an interest to pay big bucks for a piece of the new league.