Private equity and life insurance industry

[coffeecaninvestor]

Steve Eismanhas has been doing a good job digging into the PE industry. I  know we have a lot of holders of APO/KKR/BAM/etc so feel like this might be a decent topic..I feel like the PE and Life insurance industry in general is very hard to wrap my head around given how blackbox the businesses are.. I also wonder if Berkshire is liking their chops if the life insurance industry ever comes to the brink of failure they can jump in at much more attractive rates of return. Either way it was a good podcast episode and work a listen, and if you have any other resources please share. 

 

 

[dealraker]

36 minutes ago, coffeecaninvestor said:

Steve Eismanhas has been doing a good job digging into the PE industry. I  know we have a lot of holders of APO/KKR/BAM/etc so feel like this might be a decent topic..I feel like the PE and Life insurance industry in general is very hard to wrap my head around given how blackbox the businesses are.. I also wonder if Berkshire is liking their chops if the life insurance industry ever comes to the brink of failure they can jump in at much more attractive rates of return. Either way it was a good podcast episode and work a listen, and if you have any other resources please share. 

 

 

 

Personally I don't think anyone who owns these stocks, and I am an owner, has any ability to ascertain the blackbox.  

[coffeecaninvestor]

5 minutes ago, dealraker said:

Personally I don't think anyone who owns these stocks, and I am an owner, has any ability to ascertain the blackbox.  

Have you ever been tempted to sell. I get it they gave amazing track records, but it seems like it’s getting to the point where they are having to dicier and dicier things to keep it up. But I could be wrong since i haven't followed the industry. It could just be one of those narratives that pops up in every bull market. The tape worm nature of all these investments and how it is starting to work its way into 401ks, life insurance, etc is definitely concerning to me. 

[dealraker]

6 minutes ago, coffeecaninvestor said:

Have you ever been tempted to sell. I get it they gave amazing track records, but it seems like it’s getting to the point where they are having to dicier and dicier things to keep it up. But I could be wrong since i haven't followed the industry. It could just be one of those narratives that pops up in every bull market. The tape worm nature of all these investments and how it is starting to work its way into 401ks, life insurance, etc is definitely concerning to me. 

Two months ago I sold all but a tiny-tiny-tiny bit of APO coffeecaninvetor, but I own BAM, BN, and Blackstone.  Brookfield is a way back to 1986 connection while BX was bought during COVID.  These are insignificant holdings but things I've enjoyed following.  "Enjoyed" does not mean "believed" as to finances particularly that of Brookfield.  The asset manager side of these things is my limited belief or interest for the most part, the actual assets that they fee that owned by others - or hold (and fee evidently) are often entities that I would not put 5 cents towards believing the valuations they claim.  

 

What you can be sure of is that these entities will skyrocket up-to-the-right far more than any rational person would expect (and endless wet behind the ears analysts will praise them then) and shortly later they will plummet further down ---- repeatedly!  

 

Have you seen Parsad discuss these?  LOL, in any meaningful way that's about all you need to know about these things in my view.  My belief is that one day they'll be questioned both on the manager and asset side, that the institutions that flock to them for other type asset management will rebell towards the high fees.

 

But in the meantime the upwards-to-the-right over time controls the narrative doesn't it!

[rogermunibond]

Here's another doozy.  Private equity owned hospice.  Kinderhook acquires Enhabit, a provider of home health and hospice care.

 

https://www.ft.com/content/24aab74f-b4d4-4712-995f-d4ff82bc3745

[coffeecaninvestor]

19 hours ago, rogermunibond said:

Here's another doozy.  Private equity owned hospice.  Kinderhook acquires Enhabit, a provider of home health and hospice care.

 

https://www.ft.com/content/24aab74f-b4d4-4712-995f-d4ff82bc3745

I can assure you if hired a hospice agency owned by a PE firm I would be looking over that bill with a fine tooth comb. 

[dealraker]

20 hours ago, rogermunibond said:

Here's another doozy.  Private equity owned hospice.  Kinderhook acquires Enhabit, a provider of home health and hospice care.

 

https://www.ft.com/content/24aab74f-b4d4-4712-995f-d4ff82bc3745

Locally we had a guy whose estate went to our local hospice care facility subject to a provision that if it (hospice) went into private hands the money would be refunded with interest, with proceeds devoted elsewhere.  The provision of the will made it subject to gov approval and such.  Our local government is 100% one party and has been 100% one party for 40 years, all 7 commissioners for 40 years without interruption.  They rejected the grant and are in the process of having hospice go into private hands.  Of course this is not free of politics and gains for those involved and lawsuits are flying.

 

Boys will be boys, they take care of their own of course.   We are also, by county commissioner choice, using our 65 mil COVID funds for a sportsplex build.  That too has private interests who will benefit, those directly related to the commissioners.  What is new these days is the open nature of insider gains, those in power no longer fear any backlash.  One party controls, one small group controls the party.  This group gains, and all the voters stand and clap in unison.  The little man loves watching the big man get richer...as long as the big man is "like" him.

 

 

[73 Reds]

16 minutes ago, dealraker said:

Locally we had a guy whose estate went to our local hospice care facility subject to a provision that if it (hospice) went into private hands the money would be refunded with interest, with proceeds devoted elsewhere.  The provision of the will made it subject to gov approval and such.  Our local government is 100% one party and has been 100% one party for 40 years, all 7 commissioners for 40 years without interruption.  They rejected the grant and are in the process of having hospice go into private hands.  Of course this is not free of politics and gains for those involved and lawsuits are flying.

 

Boys will be boys, they take care of their own of course.   We are also, by county commissioner choice, using our 65 mil COVID funds for a sportsplex build.  That too has private interests who will benefit, those directly related to the commissioners.  What is new these days is the open nature of insider gains, those in power no longer fear any backlash.  One party controls, one small group controls the party.  This group gains, and all the voters stand and clap in unison.  The little man loves watching the big man get richer...as long as the big man is "like" him.

 

 

That Will provision is really interesting.  If Hospice became privatized before the fellow passed, legally the bequest to Hospice would have effectively lapsed.  The issue I foresee is whether the funds necessarily would have to be returned once they have been given to Hospice.   If so, the "bequest" is really nothing more than a loan, which would likely be rejected in just about all cases, especially if interest has to be paid on the loan, and in any case may not even be a legitimate bequest.   Otherwise, I'm not convinced the provision requiring a refund of the funds to the Estate (which by then would likely have long since been closed) is legally enforceable once the funds are received by Hospice.  Would make for a good Bar examination question.

[dealraker]

1 hour ago, 73 Reds said:

That Will provision is really interesting.  If Hospice became privatized before the fellow passed, legally the bequest to Hospice would have effectively lapsed.  The issue I foresee is whether the funds necessarily would have to be returned once they have been given to Hospice.   If so, the "bequest" is really nothing more than a loan, which would likely be rejected in just about all cases, especially if interest has to be paid on the loan, and in any case may not even be a legitimate bequest.   Otherwise, I'm not convinced the provision requiring a refund of the funds to the Estate (which by then would likely have long since been closed) is legally enforceable once the funds are received by Hospice.  Would make for a good Bar examination question.

I'm getting my information from the attorney who I work with as to my trust/estate, part of which was originally designated for hospice - but that's been changed.  Both she and I may be misinterpreting the actual happenings or facts.  I'll add that I do know the gifts to hospice were not all at once, that they were yearly for several years.

Edited March 4 by dealraker

[bizaro86]

1 hour ago, 73 Reds said:

That Will provision is really interesting.  If Hospice became privatized before the fellow passed, legally the bequest to Hospice would have effectively lapsed.  The issue I foresee is whether the funds necessarily would have to be returned once they have been given to Hospice.   If so, the "bequest" is really nothing more than a loan, which would likely be rejected in just about all cases, especially if interest has to be paid on the loan, and in any case may not even be a legitimate bequest.   Otherwise, I'm not convinced the provision requiring a refund of the funds to the Estate (which by then would likely have long since been closed) is legally enforceable once the funds are received by Hospice.  Would make for a good Bar examination question.

 

I think a better way to accomplish that goal would have been to bequeath the funds to either a private foundation or donor advised fund (depending on the amount) and directing the investment proceeds to be used for the hospice as long as it's public. 

[73 Reds]

1 hour ago, bizaro86 said:

 

I think a better way to accomplish that goal would have been to bequeath the funds to either a private foundation or donor advised fund (depending on the amount) and directing the investment proceeds to be used for the hospice as long as it's public. 

Yeah, but from the original post it appears that the donor wanted all donated funds returned with interest if the hospice became private so some of the same issues would still exist.  Also, in the event the Estate is taxable, I presume it would have received (or the donor expected to receive) a charitable deduction for the bequest if the hospice was a Section 501c charitable organization.  How would any return of proceeds be treated from a tax standpoint?

[bizaro86]

2 hours ago, 73 Reds said:

Yeah, but from the original post it appears that the donor wanted all donated funds returned with interest if the hospice became private so some of the same issues would still exist.  Also, in the event the Estate is taxable, I presume it would have received (or the donor expected to receive) a charitable deduction for the bequest if the hospice was a Section 501c charitable organization.  How would any return of proceeds be treated from a tax standpoint?

 

I think "return of proceeds" is probably not possible. But "redirect the income from the hospice to a different non-profit if it is sold" probably accomplishes a similar goal.

[Spekulatius]

Assuming a non Profit can pay the fund donated back when something changes seems like a bad assumption to me. A non profit would naturally spent money they received  , so how could they even pay a larger sum back?

 

The right way to structure this is with a trust that pay out annually their income to said non profit  contingent upon certain conditions . That way, you won’t pay funds to a non profit when something changes and it’s not a nonprofit any more. Of course money distributed can’t be clawed back most likely , but that is fair, since it should have been spent for the right purpose already.