[Overseas] IMF Special Report: Private Equity Funds and Insurance Companies

That said, it must first be noted that the regulatory environment for the domestic insurance industry differs significantly from those of other overseas markets. Therefore, the content of this article should not be directly applied to the domestic context; it is intended solely for learning and exchange. 1. The Driving Forces Behind the Growth of Private Equity Funds Private equity (PE) has expanded rapidly since the global financial crisis. Between 2016 and 2022, the assets under management (AUM) of private equity firms nearly tripled, reaching nearly $12 trillion by mid-2022. Private equity firms rely on frequent fundraising to support their operations, with typical fund lifespans ranging from five to ten years. Between 2008 and 2022, annual capital raised and the number of funds pursuing private equity strategies increased by over 60%. During this period, capital raised fluctuated markedly—hitting a low of just $205 billion in 2010 and peaking at $830 billion in 2021 (Figure 2). The expansion of private equity has been fueled by investors and limited partners seeking higher returns. These limited partners include public and private pension funds, insurance companies, endowments, and sovereign wealth funds—all of which have increased their portfolio allocations to private equity over the past five years. For example, between 2017 and 2022, sovereign wealth funds raised their private equity allocation from 10% to 17%. Against the backdrop of yield-seeking behavior, alternative investments—including private equity and venture capital—have attracted greater capital inflows and higher allocation weights, owing to their relatively superior returns. Since 2015, private equity indices have outperformed other asset classes such as natural resources, real estate, or the S&P 500. U.S. pension funds have played a pivotal role in private equity’s expansion. Average assets under management for U.S. public pension funds (PPFs) surged from $14 billion in 2001 to nearly $32 billion in 2022. In the quest for yield—especially amid low interest rates—pension funds have increasingly turned to alternative investments like private equity. Between 2001 and 2015, the share of PPFs exposed to private equity rose from 50% to 80%, then stabilized. Meanwhile, allocation levels rose sharply—from roughly 6% of total assets in 2001 to 16% in 2022—with acceleration over the past two years. However, returns in this segment have also exhibited the greatest volatility—far exceeding those of other asset classes. In 2021, returns peaked at 45%, only to plummet swiftly to 20%. Private equity experienced a slowdown in 2022, driven by investor over-allocation and the heightened attractiveness of fixed-income assets amid rising interest rates. With current private equity allocations already exceeding target levels, higher yields offered by other asset classes have further dampened demand. Capital raised by private equity declined by 12% between 2021 and 2022, while the number of funds dropped by more than one-third—to 1,520 funds. Private equity’s three-pronged playbook consists of leveraged buyouts (LBOs), cost-cutting and operational efficiency improvements, and finding the next buyer.

Chappell does not elaborate extensively on specific policy reform proposals. Yet the first core historical insight he draws is clear: we cannot do without social movements. His third insight further stresses that such a movement must be more inclusive and more diverse than any previous one. The second historical insight is that older adults must re-conceptualize themselves as a socially cohesive group sharing common interests—in other words, develop a class consciousness among the elderly. Yes, what we need is a large-scale, mass-based social movement grounded in inclusivity, diversity, universality, and class consciousness. Yet paradoxically, older Americans are precisely the demographic most likely to vote against such public welfare reforms; and, as Chappell documents, under the hegemonic ideology of radical individualism, they have become the most atomized, alienated, and fragmented segment within an already hollowed-out American civil society. Both books discuss the COVID-19 pandemic and its truly devastating impact on older adults. Three-quarters of all COVID-19 deaths occurred among people aged 65 and older. As Chappell reports, “In just 14 states alone, over 10% of nursing home residents died in 2020.” Yet neither book addresses the most rapid and far-reaching transformation currently underway in long-term care facilities—the rise of private equity. Since the mid-2000s, private equity firms—including Blackstone, Bain Capital, and KKR (Kohlberg Kravis Roberts)—have aggressively invested in various eldercare and healthcare sectors: skilled nursing facilities, assisted living communities, hospice and palliative care providers, retirement communities, and general hospitals. Today, 22% of for-profit hospitals are owned by private equity firms. While the exact number of nursing homes and senior living communities owned by private equity remains unclear—since these entities are often structured as part of real estate investment trusts (REITs) alongside multifamily housing, student dormitories, RV parks, and self-storage units—it is estimated that such facilities account for 5% to 13% of all nursing homes, encompassing over 150,000 senior housing units. The consequences are stark: within two to three years after acquisition by private equity firms, staffing levels decline, equipment and supplies are cut, and short-term mortality rises by approximately 10%. By slashing labor costs and extracting discretionary cash flow, private equity contributes directly to the deaths of vulnerable populations. One study estimates that between 2005 and 2016, at least 22,000 excess deaths were associated with private equity ownership of nursing homes. Allocations by various pension funds to private equity continue to climb. Consider just two landmark investments made in 2023: CalPERS—the largest public pension fund in the United States—committed $1.5 billion to Blackstone’s Real Estate Debt Strategies Fund V; meanwhile, the investment management arm of the University of California system—where the author is employed—invested $4 billion in Blackstone’s Real Estate Income Trust (BREIT). Not all these funds originate from pensions, but CalPERS’ total private equity investment now stands at $9.7 billion. Pension funds pay substantial management fees to asset managers like Blackstone, who promise high returns. To deliver those returns, these managers slash staff and raise service fees across their portfolio of nursing homes and hospitals.

NYC Pensions Eye Private Markets in $5 Billion Green Allocation

12 hours ago

New York City public pension funds plan to allocate $5 billion to private markets for green energy and infrastructure projects, aiming to meet climate goals while securing returns for pensioners.

bloomberg

2026-09-23

NYC Pensions Eye Private Markets in $5 Billion Green Allocation

NYC Pensions Eye Private Markets in $5 Billion Green Allocation

FAQ