Posts Tagged ‘train robbery’
“If you don’t allow for self-serving bias in the conduct of others, you are, again, a fool”*…
Private equity firms are in the spotlight for their negative impact on health care, journalism— indeed, essentially every sector they touch in the interest of generating big returns for themsleves and their investors (some of which are sovereign wealth funds; some, very wealthy individuals/families; but largely, insurance companies and public pension firms). Now, as the inimitable Matt Levine points out, even those investors (who were already paying massive fees) are in the private equity firms’ crosshairs…
Two basic features of private equity economics are that if you raise a fund and you spend $1 billion to buy a company, and you do a good job running the company and it becomes worth $5 billion, then:
- You charge a management fee — say, 2% per year — on the $1 billion you paid for the company, not the $5 billion it’s currently worth.
- If you sell the company — to a strategic buyer or another private equity firm or in an initial public offering — you collect $800 million of carry (20% of the value that you added to the company), but you can’t charge the management fees anymore.
It would be good, for you, to mark the company to market. Raise your own new private equity fund, and sell the company from your old fund to the new one at its current market value. Then:
- You can keep charging 2% per year, but now on $5 billion rather than $1 billion.
- You can collect your $800 million of carry now, and then if you add more value you can collect more carry when you sell it.
This is called a “continuation fund.” The Financial Times reports on “a new and controversial type of transaction that is fast becoming the private equity industry’s hottest trend in the US, UK and several other markets — deals in which a buyout group in effect sells a company to itself”:
Such deals have partly been a consequence of the tidal wave of cash that has flooded private markets during the long era of low interest rates. As that era comes to an end and a downturn looms, these deals are set to become more attractive than ever for private equity groups with companies to sell.
The deals — a way for buyout groups to return cash to their original investors within a pre-agreed 10-year time period, without the need to list companies or find outside buyers — have been growing in popularity since the early days of the Covid-19 pandemic, when a market freeze prompted a search for new options…
Equity market investors are becoming increasingly vocal about how private markets value companies. Vincent Mortier, Amundi Asset Management’s chief investment officer, said this month that parts of the buyout business “look like a pyramid scheme” because of “circular” deals in which companies are sold between private owners at high valuations.
Speaking privately, some pension funds are frustrated. “This is wonderful for the [buyout groups]; it’s one of the best things they ever discovered,” says one pension fund’s head of private equity, who asked not to be named.
But “it’s one of the worst things” for their investors, he adds. “The pie is getting bigger” as private equity balloons in size, he says, but “more of the pie is going to the [private equity firm] and less is going to [its investors].”…
More on these Machiavellian machinations: “Buyout Firms Buy From Themselves,” from @matt_levine in @business.
[Image above: source]
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As we ruminate on rapaciousness, we might recall that it was on this date in 1873 that Jesse James and his gang staged the first train robbery (the world’s first robbery of a moving train), a mile and a half west of Adair, Iowa… the site of which is now commemorated as a county park.
“Stealing, of course, is a crime, and a very impolite thing to do”*…
On the trail of looted antiquities…
The best photos to come out of the Met Gala every year are always the ones where you feel like a voyeur. It’s a weird combination of intimacy, celebrity, modernity, and antiquity that’s hard to replicate and harder, I think, to ignore. A shot of Kim Kardashian leaning against an Egyptian coffin at the 2018 Met Gala by Landon Nordeman exposes his subject in a flash of light—though perhaps not the subject anyone expected.
Out of the thousands upon thousands who saw the shot, one happened to be more interested in the gold coffin than Kim’s (heavenly) body in gold Versace. He had looted the coffin seven years earlier but was never paid for his spoils. And it was now sitting in the Met. Angry and in possession of receipts, he fired off an anonymous email to the Manhattan District Attorney’s Office to tip them off about the buxom gold figure in the photo next to the Kardashian.
A year later, the DA’s Office proudly announced that after being stolen during the revolution in 2011, the coffin of Nedjemankh was finally returning home to Egypt. Scorned criminals, ancient art, and the social event of the season—you can’t make this shit up.
But aside from that star-studded sabotage, the coffin of Nedjemankh isn’t actually an outlier. And neither is the other antiquities scandal still surrounding Kim K (she purchased an allegedly looted ancient Roman sculpture with Kanye back in 2016).
Stolen antiquities end up in museums, galleries, and private collections surprisingly often. It happens like this: Looters dig up artifacts, smuggle them to dealers, who then bounce them from port to port. Eventually, someone higher up the chain sells these artifacts to museums like the Met and wealthy collectors like Kim who are all too willing to overlook those pesky legal details.
And usually, they stay there, because most jurisdictions just aren’t interested in going after antiquities theft. But most jurisdictions don’t have an ADA like Matthew Bogdanos.
Bogdanos has been working with antiquities since 2003, when he led a mission to recover the thousands of antiquities lost after the sacking of the National Museum of Iraq. On the heels of a National Humanities Medal for his work in Iraq, Bogdanos returned to Manhattan in order to head the city’s first antiquities theft task force. It would take another 12 years of Bogdanos tackling antiquities theft largely on his own before the city established an official unit. Since its official inception, under Cyrus Vance, and now under new DA Alvin Bragg, the team has helped return something like 2,000 antiquities to their countries of origin.
Besides Bogdanos, who’s still regularly staffed on homicide cases, the small, tenacious team relies on the wide-ranging skills of three other assistant DAs, five specialists in art and archeology, two detectives, and a handful of Homeland Security agents. If you can’t find them in their office downtown, you can probably assume they’re knocking on the ornate doors of the Upper East Side. To paraphrase the man behind the raids, underneath the genteel patina of the upper-class art world is a solid core of criminal activity. The seized art actually occupies so much space that the DA’s storage facilities have been dubbed Manhattan’s best antiquities museum…
Read on as Bogdanos guides Hannah Barbosa Cesnik (@HBCesnik) through his murky milieu: “Inside the Mind-Boggling World of the Antiquities Theft Task Force,” in Anne Helen Petersen‘s (@annehelen) wonderful newsletter, Culture Study.
* Lemony Snicket (Daniel Handler), The Wide Window
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As we pursue provenance, we might recall that it was on this date in 1873 that Jesse James and his gang staged the first train robbery (the world’s first robbery of a moving train), a mile and a half west of Adair, Iowa… the site of which is now commemorated as a county park.
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