Comment by anon291

Private equity is mostly driven by state pension funds that are basically unfunded entitlements. They have to pay out more now as the boomers retire, but they have no money so seek ever-increasing rates of return, even above market rate. They can't find anything on the 'public' market, so they turn to these alternatives. Meanwhile, those on the supply side see that there is money that needs to be invested in these sorts of vehicles to have any shot of paying out, and they oblige.

People will say it's all about greed, or whatever. But it's not 'the rich' buying these PE investments. It's public pension funds (i.e., government workers, teachers, mailmen). It also has nothing to do with the interest rate (although that certainly enables it, it doesn't explain the demand for the investment vehicle itself or the source of funds).

According to a study from UNC Chapel Hill [1], public pensions comprise 31% of investors at PE funds and 67% of capital.

That means that, while it's true that perhaps the other 69% of investors are the supposedly greedy rich, if it were just them investing, PE would be 3x smaller than it is today.

We have to face the truth which is that these sorts of deleterious economic effects that occur as a result of PE takeovers are due to unfunded public pension liablities.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4283853