performance span, which is now over 15 years old, or several lifetimes in financial circles... If one adds the requisite 3 per cent premium, as recommended by many experts, for the PE investor’s inability to sell, the LBO industry’s justification for existing is tenuous indeed.’ How do these racketeers get away with it? Roughly 56 per cent of deals bought by PE funds since 2006 have not been sold on and are booked as unsold portfolio gains. What’s more, 40 per cent of PE funds are non-reporting. Hooke points out that Bernie Madoff ’s ‘claimed returns were very favorable compared to benchmarks, but no third party verified the returns for many years’. The PE industry smooths its returns compared to the stock market, thus making it appear less risky, and PE funds are valued by the Big Four accounting firms in such a way that during market downturns they appear to fall in value less than public companies. As Hooke argues, this ‘flies in the face of financial theory and defies common sense’. Apart from the racketeers themselves, the PE industry has what Hooke calls its enablers and fellow travellers. The enablers include state legislatures and union leaders, the accounting authorities, the private equity databases, the IRS, and the SEC. For example, the IRS allows PE companies to have a 100 per cent interest expense deduction on their debt loads. The fellow travellers include the business media, investment managers, wealth managers, and even business schools. The business school to which Hooke is affiliated does not have a PE course and yet ‘about half of the students want to join the industry upon graduation’ because they ‘see it as an interesting business and a one-way ticket to a good living’. This is an excellent, concise book by

a veteran industry observer, lucidly and dispassionately written, with abstruse matters explained in layperson’s terms. Hooke realises that he is a Cassandra and that probably nothing will come of his dire warnings. Even mortgage-backed securities and dotcom investments were publicly traded and eventually exposed as investment fads, whereas ‘the rates of return, fees, and diversification attributes of the buyout asset class are shrouded in a numbers fog’. This 40-year-old racket will doubtless continue. S

Nota bene

Exponential By Azeem Azhar (Random House Business, £20)

Azeem Azhar’s Exponential View newsletter, a ‘transdisciplinary guide to our near future’, reaches the inboxes of more than 100,000 executives, policymakers and investors worldwide. Now the writer and technologist converts his expertise to a ‘revelatory guide to how technology is changing the world’. The theme is all-encompassing, but Azhar’s argument is

focused. The exponential development of technology, he asserts, is out of pace with the incremental speed at which human society can adapt to it. Azhar holds that this ‘exponential gap’ can help to explain some of society’s most pressing problems, from how businesses adopt new tech to how liberal democracies fail to grasp evolving social issues.

State of Terror By Hillary Rodham Clinton & Louise Penny (Macmillan, £20)

Former US secretary of state and presidential candidate Hillary Clinton’s post-politics career has been almost as active as her time in office. In State of Terror, her first foray into fiction, Clinton teams up with Canadian mystery writer Louise Penny for a novel that promises ‘unsurpassed thrills and incomparable insider expertise’. The plot follows newly sworn-in secretary of state Ellen Adams as she is faced with a new terrorist organisation devastating Europe. As the ‘damaging effects’ of the previous president’s actions are unspooled, Adams is forced to consider the inconceivable: was he a traitor to his country?

Shutdown: How Covid Shook the World’s Economy By Adam Tooze (Allen Lane, £25)

With Crashed, his extensive analysis of the 2008 financial crisis, Adam Tooze established himself as one of our great contemporary economic chroniclers. Now, with Shutdown, the historian applies his trademark rigour to the economic response to the coronavirus pandemic, taking stock of the manner in which the global economy ground to a halt and the way in which central bankers intervened. Tooze takes the reader through the economic events of 2020, moving through everything from currency fluctuations to broader institutional tremors. As Shutdown makes clear, uncertainty remains. But few

writers are as equipped as Tooze when it comes to extrapolating the convergence of economics, history and society.

Ghosts of the West By Alec Marsh (Headline Accent, £9.99)

Spear’s editor-at-large Alec Marsh returns with the third instalment of his Drabble & Harris thrillers. This time, an investigation of a grave robbery takes a turn when it is linked to a theft at the British Museum and, then, a murder. The mystery takes Drabble and Harris all the way to the American West: if they don’t act fast, a bloody conflict threatens to ensue. At the same time, the pair could be headed for a contretemps of their own, with the arrival of the enigmatic Dr Charlotte Moore….

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