Member

The problems with private equity have recently been debated in this House. The noble Lord, Lord Monks, had a Question for Short Debate on 20 November. I reread the speech I gave, and I was quite impressed with it. It explained the difficulties and the lack of congruence between private equity and pension funds. In my view, there are severe problems with pension funds investing in private equity. They are illiquid, and under the present system people have the right to take their transfer value out of a pension fund at any time, so a level of liquidity is required. Also, the valuation of private equity is a very uncertain art. For market-based investments, such as closed-end investment funds, you know how much they are worth, but is a private equity fund really worth what they say when they effectively buy their own stock and adjust the value? These funds can undoubtedly be profitable, but the uncertainty of their valuation makes them less suitable for pension fund and other sorts of investments.