Fees and investment terms between private funds and their investors have always been freely negotiated. In practice, that means the largest investors, including defined-benefit pension plans that invest on behalf of firefighters, teachers and police officers, often got the best deal. The new SEC rule will require that certain fee arrangements be “fair and equitable” and ban private funds from offering their largest investors the opportunity to cash in early. In practice, this will mean that defined-benefit plans will pay higher fees and have less liquidity, ultimately harming retirees.
The final rule will also establish quarterly disclosure requirements for fees and performance as well as an annual audit requirement to second-guess the valuation of fund investments. These compliance costs will be borne by all investors in the form of higher fees and lower returns.
The SEC’s rationale for its new rule is that private fund markets are uncompetitive. That’s simply wrong. Fees are going down and the largest funds, like Citadel and Blackstone, hold small market shares. The five biggest hedge funds constitute less than 5% of total assets under management. Performance net-of-fees has been strong. Private equity funds have returned 12% a year since 1989, compared with 8% for the S&P 500.
Mike Munger warns of the perversity of government officials ‘investing’ other people’s money. A slice:
The US has the best investment sector in the world, by quite a bit. In fact, as I argued three years ago in this space, “liquidity” is one of the three central foundational arguments for private capitalism. The process is faster and more accurate, and losses are paid for by those who stand to gain if the investment pays off.
Politics inverts that calculation: Nearly everything that private investors count as a “cost” goes on the “benefit” side of the ledger. Hire a bunch of construction workers to build a project out in the middle of nowhere, unconnected to infrastructure or markets? Clearly very costly, and a poor investment economically. But such “public projects” are a huge benefit to the politicians who are able to buy votes from those rural areas using the money of taxpayers from other parts of the state. If my rural district benefits, I get reelected, regardless of the fact that such pork barrel spending is a net waste of resources. (I’m looking at you, Global Trans Park, home of gigantic spending for rural “development” in North Carolina.)
How about “attract a business to a location that makes no economic sense”? A cost to the state, and to the nation, but a benefit to the local politicians who are able to divert public money to buy votes, and to enrich themselves with insider real estate deals. Look, the fact that private investment firms are not willing to make bets on these companies considering a move to rural areas means that such a move is more costly than the system of profit and loss would require. The extra costs to the company are being paid by taxpayers. The fact that private investors would not consider such risks tells us all we need to know: It’s a bad bet.
David Henderson busts myths about labor unions.
John Tierney busts “the mysogyny myth.” Five slices:
Misogyny is supposedly rampant in modern society, but where, exactly, does it lurk? For decades, researchers have hunted for evidence of overt discrimination against women as well as subtler varieties, like “systemic sexism” or “implicit bias.” But instead of detecting misogyny, they keep spotting something else.
Consider a new study that is one of the most sophisticated efforts to analyze implicit bias. Previous researchers typically looked for it by measuring split-second reactions to photos of faces: how long it takes to associate each face with a positive or negative attribute. Some studies reported that whites are quicker to associate black faces with negative attributes, but those experiments often involved small samples of college students. For this study, a team of psychologists led by Paul Connor of Columbia University recruited a nationally representative sample of adults and showed them more than just faces. The participants saw full-body photos of men and women of different races and ages, dressed in outfits ranging from well-tailored suits and blazers to scruffy hoodies, T-shirts, and tank tops.
Who was biased against whom? The researchers found no consistent patterns by race or by age. The participants were quicker to associate negative attributes with people in scruffier clothes, but that bias was fairly small. Only one strong and consistent bias emerged. Participants in every category—men and women of all races, ages, and social classes—were quicker to associate positive attributes with women and negative attributes with men.
The participants were guilty not of misogyny but of its opposite: misandry, a bias against men.
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This instinct to protect women has been essential for societies to survive, but it has also made us easy prey for a modern industry of academics, journalists, activists, lobbyists, and bureaucrats who falsely blame sexism for any gender gap that doesn’t favor women. The misogyny myth has served the interests of this diversity industry, but it is enormously damaging to the rest of society—women as well as men.
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“The scientific establishment has been irresponsible in making all these pronouncements about bias against women without ever feeling the need to check the empirical literature,” says researcher Stephen Ceci. He and Wendy Williams—both psychologists at Cornell, and married to each other—have found that female scientists fare as well as, and often better than, comparable male scientists. To set the record straight, Ceci and Williams five years ago began an “adversarial collaboration” with another prominent researcher with a conflicting perspective, Shulamit Kahn, an economist at Boston University who had identified and criticized bias against women working in her field.’
The result, published this year, is by far the most thorough and balanced assessment of gender bias in academic science. After sifting through thousands of studies, the authors conclude that, while female scientists in the past did face discrimination, since 2000 they have fared as well as comparable males in receiving federal grants or in getting an article accepted at a journal. And when it comes to being hired at universities, the authors find that women have an advantage over men with similar credentials. “Academia is actually doing a disservice to women and to science by perpetuating myths of bias against women that the weight of the evidence doesn’t support,” Kahn says. “It discourages women from entering academic careers and discourages institutions that have actually been quite successful in leveling the playing field.”
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The myth hurts us all because it undermines the system that has enabled both sexes to flourish as never before: meritocracy. The principle that people should succeed according to their abilities and achievements, not their membership in a group, is “the intellectual dynamite which has blown up old worlds,” as Adrian Wooldridge writes in The Aristocracy of Talent: How Meritocracy Made the Modern World. The old stagnant aristocracies shielded themselves from competition by enforcing the myth that men of noble birth were inherently superior to male commoners and to all women. But that myth—and the spoils system for male aristocrats—couldn’t survive the meritocratic revolution.
When commoners got their chance to compete in the eighteenth and nineteenth centuries, they transformed the world with innovations in government, science, medicine, public health, technology, and commerce. Women were still mostly excluded, but they reaped enormous benefits from the male competition. The most important gender gap reversed, as women’s life expectancy rose, equaling and then surpassing men’s. New industries and inventions—textile mills, food-processing companies, washing machines—liberated women from domestic labors that had consumed their days. Once freed to work outside the home in the twentieth century, they shattered the myth that women were too fragile and intellectually limited to succeed in the public sphere.
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The diversity industry has corrupted science and so many other institutions that it has become as entrenched as the old aristocracy—and without even the pretense of the traditional noblesse oblige to the less privileged. No matter how much harm it does to society, no matter how badly it poisons relations between the sexes, the diversity industry will cling to its privilege until we recognize that it, too, is peddling a lie.
