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Is Tony Robbins Right About Private Equity?



Is Tony Robbins Right About Private Equity?

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In a recent CNBC interview Tony Robbins extolled the virtues of investing in private equity, arguing that private equity provided high returns – with low risk. Is he right? Should everyone invest in Private Equity?

Here is a link to the full CNBC video: https://www.youtube.com/watch?v=DWZ67Cx1zm8

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Further Reading:
An Inconvenient Fact: Private Equity Returns & The Billionaire Factory: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3623820
A Bottom-Up Approach to the Risk-Adjusted Performance of the Buyout Fund Market: https://www.tandfonline.com/doi/pdf/10.2469/faj.v72.n4.1#:
Cliff Asness – Volatility Laundering: https://www.institutionalinvestor.com/article/2bstqfcskz9o72ospzlds/opinion/why-does-private-equity-get-to-play-make-believe-with-prices
Mark Anson Paper: https://www.jstor.org/stable/43503783
Aswath Damodaran Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/privateequity.pdf
MSCI Leverage in Private Equity: https://www.msci.com/www/blog-posts/leverage-in-private-equity-what/04942552461#:~:text=Leverage%20can%20be%20a%20key,improvements%20rather%20than%20financial%20engineering.

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View 43 Comments

43 Comments

  6. @antonomaseapophasis5142 on

    Wow! You traversed a lot of open questions.
    I have not fully absorbed all the points you made, and I had to back up a few times to hear correctly.
    I have the impression that there were a few perspectives that I can retain for better investment planning.
    It was gracious of you to go easy on lil’ ole Tony.

  9. @persimmonpuddin on

    everything private equity touches dies. tony robbins sux if he is pushing private equity. doesn't take much research to read about the devastation private equity is raining down on our healthcare systems.

  10. @louisgiokas2206 on

    In the early 1980s I went from one conglomerate (Singer) to another (General Electric). After I left Singer, they were bought out by one of these firms and pieces sold off. The idea, as I recall, was that debt capacity was a wasted asset if not used. This seemed to be a bad thing, as many of the companies being broken up this way had been successful for a long time.

    Then I was at GE in Jack Welch's heyday. He was fairly new into his tenure and had really turned around the company with modern management techniques. I got to attend courses at the corporate training center, and it was really instructive. To give you an idea for how well GE was run in the early to mid-1980s, I had two checks to deposit at the bank at one time. One was a government refund check and the other was a check from GE (for an award). I was told that the government check would have at least a three day hold on it while I could get cash for the GE check right then and there.

    Then Welch got into the finance business. This was not anything like the industrial businesses GE was known for. GE had always had a financing arm, but this was to assist customers in buying GE equipment, which was often very expensive. It also was key to GE not paying corporate taxes. The depreciation expense offset any taxable income. It was brilliant and predated Welch. Well, in the end it was the financing that led to the recent breakup of the company, which followed many years of selling off businesses, many of which continue to do very well.

    What the GE situation reminds me of is Chinese conglomerates today. If you look at just about any large business in China today, they are in a number of unrelated industries. Take real estate companies building EVs (Evergrande). This is not working out so well.

    Elon Musk has it right. He has lots of different businesses, but these are all separate. He does not have a holding company, as far as I can tell. Each business stands or falls on its own merit.

  14. @Tracey66 on

    Don't walk away from private equity investing – run. I have half of my retirement investments in private equity; one company has lost all its money due to embezzlement, another hasn't provided a return in over five years (and is a half step away from bankruptcy), and the third has provided meager returns occasionally, but we'll all be able to cash out soon. "Soon" has been about to happen for over five years, too. All this while charging me $157.50 per year to not do anything for me, including answering my calls and emails.

  15. @Matlockization on

    I thank you for your research and verdict. I enrolled in Anthony Robbins wealth creation course about a decade ago (share investor) and found that support involved a trailing fee which was ridiculous. American marketing & hype at its finest. I lost money !

  19. @r3adrpro811 on

    Are you telling me that Tony Robbins is misleading us? Surprise, surprise, surprise! Shouldn't we trust someone who is a favorite speaker at MLM conventions and who is demeaning towards the women in his audience

  21. @ctwolf on

    I did a project a decade ago to try and help people access PE because it shits on public markets so hard.

    A regulator legit made my life hell and then stole the model and legal framework after extorting it.

    The claim is valid, but there are a lot of really bad plays in the market and without sufficient funds to pay government people, you will get fucked, especially if you are actually helping people.

    Edit:

    I just finished the video, isolating to just Henry Kravis' Bootstrap strategy, or its watered down LBO variant that is popular, is a great angle if you want to downplay PE. This is no longer where the large rewards are. But a variant on Kravis' bootstrap thesis will do well in a particular segment of the upcoming market cycle in ~2/3 years (as of how its all looking right now, we could see a trigger this year that plunges us into a full blown and admitted recession, but maybe not, so lets stay conservative).

    But I digress, the point is, PE does substantially outperform S&P 500, and the cherry picked best public market equities are even more aggressively stomped out by the best cherry picked PE entities. By 5x+ in the same time periods.

    You hinted at the cause in the video, its the MC's. Growing from $1T to $2T is a lot harder than growing from $10M to $100M.

    Edit #2:

    Because people might read this without appropriate background context, PE is VERY illiquid, this is what tends to make it unsuitable for normal everyday people, you cant access your capital or convert it to cash. You must wait for the liquidity event which can take 10 years in some cases, but almost always takes multiple years. There is a lot of other nuance here as well.

  24. @73BigMC on

    Judging from the clip, Robbins wasn't advising people invest in PE; you cannot do that directly. He is advising investing in listed PE fund managers on the basis that these entities get fees and performance fees which is better than the institutions and HNWI who do invest direct in the funds and just get the performance. The one year return for the S&P Listed PE Index is slightly higher than the S&P 500, suggesting he is correct, at least in the short term. However, over 5 years the S&P (93.74%) outperforms the listed PE index (61.05%).

  32. @danmahoney8577 on

    This was great, I started reading Tony’s book after seeing his claims and found the same research from Buffett you cited. I didn’t get through the book entirely but from what I gathered Tony has worked out a way where you can get in the best funds and he will get a cut.
    On of the other good sources of info on whether individuals in private equity is Charlie Ellis. He was a board member of the Yale endowment. He came to the same conclusion you did. Thanks.

  36. @JackyJones-n9j on

    Thanks for the continuous updates! All we need is the right advice on how to invest properly and we will be set for life, I made 38k from my little invested 11k regardless of how bad it gets on the economy. Thanks so much Keira Watson for keeping me ahead of the market.

  38. @Bufford2024 on

    The only thing Tony Robbins is right about is … boastful shouting. Late cycle gangsta grift for the poor and very doofus last man standing with " pennies in the pocket" grift. Run … along with your thinning wallet. Let me simplify … scam, scam, and scam.😮

  43. @olanderdecastro52 on

    In my 40 year insurance career, I have worked for publicly traded companies and ones owned by private equity firms. I’ve also worked for a companies that were owned by private families. And of the three I can only say that the best ones are owned by individuals who are working in the business and grinding it out right there next to you. They appreciate you pay you well and make sure you and your family are happy. All the rest will shut down your division or department lay you off fire you for not identifying a man as a woman as a woman, being patriotic or being outspoken. Family owned businesses keep it real. Everybody else screws you blind.