The Privatization of Retirement? Array ( [cookie] => a6ce05-9798d9-de687d-41366d-f698d6 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 1 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 176471 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

“I refuse to join any club that would have me as a member.” – Groucho Marx

Chart of the Day

Good morning!

The quest to get retail investors into private equity took a major leap this week: Empower, a major provider of 401(k) solutions, announced that it would start allowing Americans to allocate assets into private equity and private credit investments. Specifically, Empower will enable employers to offer employees access to the private market via well-known PE stalwarts like Apollo Global Management, Neuberger Berman, and Partners. Empower chief executive Ed Murphy told the Wall Street Journal that “a lot of private asset managers see tremendous opportunity there.” 

That much seems intuitive: the PE industry is smarting from several years of difficult fundraising. At a time when many industry insiders doubt that a full recovery is imminent, in part due to headwinds from tariff-related uncertainty, Empower is offering the industry potential access to roughly $1.8 trillion worth of assets held by 19 million people. 

Murphy also argued that “we believe there are tremendous opportunities for retirement investors in private investing.” That assertion is perhaps less intuitive. The pursuit of assets from individual investors comes even as universities and non-profits seek to divest their endowments of private equity holdings. One obvious question for individual investors is this: If these investments are so great, why are institutions fleeing them, even though they typically have a much higher tolerance for risk?

One potential answer lies with the current conflict between elite institutions of higher learning and President Donald Trump. For example, the White House’s tensions with Harvard University escalated this week, with Trump continuing to cut federal grants to the esteemed university, prompting the school to expand its previously filed lawsuit against the administration while tightening its budget. To put it bluntly, our ivory towers are hurting for cash, and this could eventually push them to exit their private-market investment early, despite the losses and penalties they would likely incur as a result. Harvard’s endowment has allocated almost 40% of its $53 billion endowment to private equity, according to Bloomberg.

But that would only accelerate a pre-existing trend. Long before Trump returned to the Oval Office and began squaring off against academia, such institutions had already been reducing their allocations into such investments, and it’s because even they were finding the returns of such private investments inadequate when measured against their significantly reduced liquidity and elevated risk. (Funds invested into PE typically get locked up for years before investors can pull money out.)

It might be stating the obvious to acknowledge that individual investors and universities have very different objectives, risk tolerances, and time horizons. A study of how private equity investments have worked out for these venerated institutions is nonetheless warranted before taking advantage of what seems to be a quickly broadening access to this asset class. 

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📧✍️Here’s what a reader commented📧✍️

Question: How would you approach the problem of skyrocketing drug prices in the U.S.?

Answer: How ironic that Trump’s tariffs will also raise the prices of drugs. The effective control of drug prices needs to also include the insurance companies. The price of drugs can be reduced by making it more of a truly free market. Current patent regulations keep drugs from open market production until 7-12 years after introduction. Reduce this time to 3-5 years and provide government breaks for any companies that lose money due to high R&D costs during this time frame. The same must be done with the insurance companies. They are controlling drug prices. An expensive muscle relaxant such as Baclofen that costs $5 with insurance can cost $300 for someone without insurance. This type of price delta is straight forward price gouging and it is done to those who can least afford it. This is not done by the drug companies but by the insurance companies. This type of activity by insurance companies can be controlled by the government through monopoly legislation.

Catch up with FS Insight

Despite persistent bearishness and the fact many investors are offsides, we see multiple arguments for P/E expansion which offset near term earnings risks.

Technical

Short-term trends in US Equities remain bullish but could face some consolidation after expiration, given the massive amount of calls being traded vs. puts based on the CBOE Equity Put/Call ratio.

Crypto

We see a lack of leverage in the crypto market as reducing potential downside convexity. Meanwhile, a big buyer of ETH presents an additional tailwind.

News We’re Following

Breaking News

• Charter agrees to combine with Cox in $34.5 billion cable deal BBG
• Trump says U.S. will set tariff rates for most nations within weeks CBS 

Markets and economy

• Companies withdraw guidance amid Trump’s tariffs REU
• Bond vigilantes stare down Trump’s ‘big beautiful bill’ SEM
• SEC buyouts hit legal, investment offices hardest, data shows REU
• Japan assets saw record inflows in April as investors fled U.S. markets — their promise still holds CNBC  

Business

• Novo Nordisk CEO Jorgensen to leave after fall in share price BBG
• Coinbase’s claim of 100 million users under SEC scrutiny QZ 
• Nvidia seeks Shanghai R&D site after US chip curbs, say sources REU
• Saudi Arabia snaps up US chips following Trump’s visit SEM

Politics

• FEMA head admits in internal meetings he doesn’t yet have a plan for hurricane season WSJ
• SCOTUS hears birthright citizenship case that could influence Donald Trump’s policy agenda SEM
• Trump’s Qatar jet gift ‘rife with political espionage’ issues, Republican Sen. Collins warns CNBC 
• Air traffic controllers in Denver scrambled to use backup communications during an outage AP
• Ex-FBI boss James Comey investigated for seashell photo seen as threat to Trump BBC 

Overseas

• India disputes Trump claim it is ready to charge US ‘no tariffs’ BBC
• Japan to hold out for better trade deal with US FT

Of Interest 

• Orange you glad we finally figured out why some cats are ginger GZ 
• Will the pope, like other American expats, have to file U.S. taxes? WSJ