Private equity acts like Ponzi schemes

A leading figure at Europe’s largest asset manager has accused parts of the private equity market of acting like a ‘Ponzi scheme’. 

Vincent Mortier, chief investment officer at Amundi Asset Management, said some buyout firms were falsely inflating their profits by selling businesses on to each other – and paying higher prices with little regard for actual value. 

Private equity firms’ tactics can be controversial – making their money by snapping up businesses and selling them on for a profit – but Mortier claimed some are passing companies between them in a manner similar to a pyramid scheme. 

He told investors at a virtual press briefing: ‘You know you can sell [a company] to another private equity firm for 20 or 30 times [that company’s] earnings. 

‘That’s why you can talk about a Ponzi. It’s a circular thing.’ 

Mortier added: ‘ Eventually there will be casualties, but that might not be for three, four, or five years.’