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Private equity may be our No. 1 economic boogeyman. It is blamed for rising real estate prices, poor medical care, and ruining many of the businesses we used to love. And yet it is also being mainstreamed as an asset class, with most everyone seemingly wanting a piece of the $7 trillion or so market that touches many of the goods and services we consume. The lure only grew stronger during the initial public offering of SpaceX, which valued the company at $1.8 trillion and handed unimaginable wealth to private equity investors.
Although it’s been said before, it’s worth repeating: None of that means private equity should touch our portfolios despite the government’s increasing efforts to add so-called alternative investments to the retirement accounts of Americans.
Private equity, which pools capital from institutions and wealthy individuals and deploys the money in non-public companies, plays an important role in the economy. It can be an invaluable source of financing for smaller firms looking to grow and bring better management practices to those that are troubled. It can even help make housing more affordable.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.