There has been a large shift in recent years by companies to invest workers' pensions into private equity markets rather than bonds or public stock. Although private equity tends to come with higher returns, there are also many risks that are not being talked about. Although private equity has survived and been popularized since the 1980's, a large increase in investments, as according to the Large Numbers Law, causes returns to decrease over time. Therefore, as private equity continues to grow, peoples' pensions will be invested in riskier and risker games in order to get returns. Also, within the private equity market, a secondary market has advanced, leading to risky trades in cheap debt. Therefore, a repeat of the housing bubble of 2008 could quickly be in effect. Also, private equity is largely dependent on debt being able to be bought cheap, so rising interest rates could cause substantial problems in coming years. Finally, without many of the tax loopholes like counting profit as capital gains, many private equity firms could be in a bit of trouble in coming years. It is extremely important that workers look into where their pensions are being invested because many of the these big risk could lead to insolvency and troubling futures for employees in the coming years.
https://www.economist.com/leaders/2022/02/26/investors-have-come-to-see-private-markets-as-a-cash-cow
Your points are very true and seem to be overlooked in the pension plans. Are bonds the better investment plan for pensions long term? They are probably safer but yield less return. I'm not fully informed on how pensions work but maybe the workers could get a choice on if they would prefer to have their pension invested in private markets or bonds after receiving information on the potential drawbacks and benefits of each investment type
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