The Private Equity Scam They Don’t Want You to Ask About

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Private equity is the hot new sales pitch—and a dangerous trap if you don’t know the right questions to ask. In this episode of Watchdog on Wall Street:

• Why even Yale’s experts struggle to beat the market with private equity
• The insane fee structures no one wants to talk about
• How rising interest rates crush “alternative” returns
• Why you could get locked in with no way out when you need your money most
• The questions that will expose whether your advisor actually understands what they’re selling

Don’t get duped. If your advisor can’t answer these, you know where to find us.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast, explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact that we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
Private equity questions you must ask before you invest. I've
been hammering private equity here. I've hammered hedge funds private
prior to private equity. I hammered ridiculous IPOs back in
the nineteen nineties. I hammered I hammer anything that's going
to hurt individual investors out there. Does that mean does

(00:40):
that mean all private equity, all alternative investments are bad? No? No.
The issue is is that I'm gonna be honest, most
advisors out there they don't know. They really don't. They
don't understand. I mean, they're they're told what to put

(01:04):
into people's portfolios. They just don't have the experience or
knowledge when it comes to these things. And what is
happening right now is that the big firms out there
see an opportunity to really cash in on this, and
it's just go out there and sell it. We're telling
you it's good, go ahead and do it, and that

(01:24):
leads to all sorts of problems you got to have.
You got to have some questions to ask, some questions
to ask when it comes to private equity. Guy, I
got a great deal of respect for Wright with Wall
Street Journal, Jason's wide. He's been on this as well

(01:46):
for some time. Got an email from him talking about this.
Questions to ask, Questions to ask your financial advisor. So
we are Arkowski Investments. What you ask your financial advisor?
Anybody who is promoting promoting any sort of alternative not

(02:09):
this is good luck with this because if it eventually
makes it, which they're trying to do into your four
to one K plan, well you're going to get the kid,
the kid that showed up and gave the little seminar
there to explain this to you. You really think he knows? Anyway,
here's some questions you can ask. Giant institutions like Yale

(02:32):
University have dozens of specialists with years of experience and
expertise in selecting and monitoring alternative assets. Even so, their
performance has often been disappointing. What do you know that
they don't the question? By some measures, private equity is

(02:55):
even more expensive than publicly traded stocks, Aside from past performance,
which isn't predictive, why should I believe that this fund
is likely to offer a superior return? Great question to ask.
ETFs carry annual expenses as low as point zero three percent.

(03:16):
The typical alternative fund charges annual fees of at least
two percent seventy times more. Some charge at least two
hundred times more. Why do you think this fund is
worth seventy times more than an ETF? From two thousand
and eight through twenty twenty two, alternative funds benefited from

(03:40):
being able to leverage returns with borrowed money at extraordinarily
low interest rates. With interest rates higher, why won't future
returns be lower? If this alternative fund is leveraged? How
has it performed relative to a low cost ETF have

(04:00):
purchased with borrowed money? For example? How has a private
credit fund performed when compared with a bond ETF bought
with leverage. Private equity funds are sitting on tens of
thousands of companies they can't sell. Why should I buy?

(04:25):
If I need to get my money out? How long
will I have to wait? And what will it cost me?
Do you earn any additional compensation? For this recommendation. Do
you own it yourself? Okay? These are questions that you

(04:49):
need to ask. Okay Again, we've already worked with Markowski Investments.
We provide you answers to everything. Go ahead, ask ask
your advisor, yes, yes, ask away, ask away, see if
they can answer these questions. When they can't, then you

(05:14):
pick up the phone, you go to our website at
Watchdog on wallstreet dot com, and you get in contact
with us again. I'm actually gonna provide We also have
our newsletter, which is available on Watchdog on wallstreet dot com.
I'll have all of these things in the next edition
of our newsletter that'll probably be coming out in my two weeks,

(05:34):
so you can sign up for that there as well.
Watchdog on wall street dot com