You don't want your retirement account to be a casino. You want companies that can provide stable, long-term growth of your portfolio-- so the money's there when you need it.
Pe includes many illiquid subcategories including real estate, LBOs, startup investing, even niche stuff like infrastructure investing
Not as the term is used in finance. Venture and PE are separate asset classes. Venture-like assets can become PE-like, in the same way private equity can become public equity. But PE is based on cash flows and leverage; VC is based on growth.
CFA is the best source, but there are so many others, including my professional experience at a major asset manager.
https://www.cfainstitute.org/en/membership/professional-deve...
> Definitions of private equity differ, but in this reading we include the entire asset class of equity investments that are not quoted on stock markets. The private equity class stretches from venture capital (VC)—working with early stage companies that in many cases have no revenues but have potentially good ideas or technology—all the way through to large buyouts (leveraged buyout, or LBO) in which the private equity firm buys the entire company. In some cases, these companies might themselves be quoted on the stock market, and the private equity fund performs a public-to-private transaction thereby removing the entire company from the stock market.
I have personal experience with at least two startups that had undergone that experience and are still around right now.
Cat bond investors usually have large portfolios of other bonds, and are mostly insurance companies and pension funds who want to marginally improve their results without increasing volatility.
There are however situations where a cat bond investor can make a lot of money: live catastrophes. For example, if a hurricane is on its way to Florida, cat bonds covering Florida insurers will trade at a deep discount. If the hurricane changes its course and doesn’t make a landfall, their price goes back to par. A skilled (or lucky) investor could double their capital in a few days.
You should take a look at Fed actions regarding public markets over the past few months.
Certainly all the big PF in the UK will have some PE - source I had an off the record briefing from a trustee on one of the biggest UK ones.
It’s definitely a bit riskier but no one is going to lose their retirement savings because of this rule change. The fees on the funds that offer this exposure are where 401(k) accounts will really get screwed.
For all the faults in the industry, fundamentally, private equity provides a means to invest in private companies that can benefit from loans or funding rounds, while also offering a return on investment to smart private equity investors. There have been plenty of scandals with private equity firms taking advantage of bankruptcy laws in large companies, but the industry as a whole seeds companies of every size, even though you only hear about VC firms in the tech startup bubble.
What
The alternative to that, before the rise and acceptance of index investing, was people using their 401k money to buy individual stocks. But we all know that your standard mom and pop investor is not going to have time to cut through the bullshit and effectively research companies when they have a 40hr/wk job, a family, hobbies, etc. So those 401k investments were based mostly on personal hunches, word of mouth, and pump and dump schemes. That was really dumb money, and did even less for the economy.
So while I agree with you that index investing isn't doing a ton to push corporate management to do better in the way "smart money" does (in theory), when you consider the world before index investing was a thing you have to admit that money today is on average "smarter."
Average people should be able to grow their wealth over time without throwing money into inefficient instruments.
By analogy, house flippers rely on a market for turnkey homes.
My point is not so much to decry index investing as evil as to point out the irony of index investors complaining about more productive forms of market participation.
Public companies have to submit regular financial reports, which are handled by independent auditors. So you can be reasonably sure that a company claiming to make money, is making money. And executives have a legal requirement to protect share holder value.
Buying shares in Apple is much less of a "gamble" than opening your own business.