PRIVATE EQUITY & HEDGE FUNDS A New Global Strategy - A First Step - By Poul Nyrup Rasmussen Party of European Socialists

We need capital markets to finance our investments Real Economy & Investments Financial Markets HFs & PEs Not subordinated any longer  Cost effective?  Transparent and accountable  Long-term financing?  Companies better off?  Respecting company values?  Social partners?

The debt and culture of extraction Debt Higher returns % Tax deductions Fewer invest- ments Overburdened credit markets IMF : High risk of distressed companies

”Financial engineering” Returns Stressed companies (“efficiencies”) Tax evasion Business cycles ”Debt push down” “Recaps”

Better than others ? Ludovic Phalippou & Maurizio Zollo University of Amsterdam: “Net returns – adjusted for management fees and methodological errors – 3,8% below the stock market”. The World’s largest pension fund CalPERS: Picking the winners? Since 1990 invested in 257 funds – 107 has given a negative return!

Our own money Capital Commit- ments (40%) 6-8 years Black Box Buy-outs Debt Asset- stripping For the partners Fees/ trans.costs ”Carry” (20%) Equal share (8%) For pension funds The rest On top: 2% fees for the partners - each year!

I. What to do? Transparency and disclosure to ensure financial stability Setting up limits of leverage to lower the risk of default and not undermine firms Effective taxation Managing “Conflict of interest”

II. What to do? Pension funds unite! Make new ethical claims Workers rights and info as in other take-overs. Need to be consulted and informed Respecting collective bargaining, information and consultation We don’t have to wait for a new world government!

It’s about changing behaviour Legislators Labour market PE & HF Industry Pension funds Trade Unions Re-balancing