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Investment Shift

Calpers, the largest public pension plan in the US, is shifting its investment strategy by reducing stock and bond holdings and increasing private market investments by over $30 billion. Scott Galloway questions whether the impressive past performance of private equity, which has yielded nearly 12% annual returns over the last decade, can be sustained or if it is merely cyclical 1. He highlights the structural advantages of private equity, such as long-term capital commitments and control positions in companies 2.

The question is, are the returns from private equity cyclical like most asset classes, or is there a structural advantage to private equity investing?

--- Scott Galloway

Scott advises caution, noting that overinvestment in successful industries can drive down returns 1.

   

Market Analysis

Scott provides a broader analysis of private equity, emphasizing the skill and financial acumen required to succeed in this market. He argues that private equity firms are generally good owners who invest in growth and cut unnecessary costs 3. Scott contrasts private equity with venture capital, describing the latter as often more ruthless and less aligned with the interests of entrepreneurs 4.

Generally speaking, private equity players are good owners and if they see growth potential, they'll invest.

--- Scott Galloway

He also notes that private equity firms are adept at aligning management's interests with their own, which contributes to their success 3.