Our new financial masters
How asset managers work in the shadows – and shape all of our lives.
“Today, asset managers collectively own global housing and infrastructure assets worth, at a minimum, $4trn. The upshot is that asset managers are intimately implicated (albeit without most of us being aware of it) in everyday social life. They own, and extract income from, things – schools, bridges, wind farms and homes – that are nothing less than foundational to our being. Forty years ago, it would have been unthinkable that we would buy our gas from, make our parking payment to, or rent our home from a company like Blackstone. But this is the new reality.
“In a very physical, if also strangely intangible respect, all of our lives are now part of asset managers’ investment portfolios. Arguably, this is truer in Britain than anywhere else. Consider the quiet county of Kent in south-east England. The entire infrastructure of wastewater collection and treatment in the county, including tens of thousands of kilometres of sewers, is controlled by Macquarie, a leading Australian asset manager. Macquarie also controls much of Kent’s infrastructure of water supply ... Housing? Blackstone owns rental properties in the small Kentish town of Paddock Wood. Student housing? Chicago-headquartered Harrison Street owns digs in Canterbury. Care homes? New York-based Safanad controls homes in Dartford and Gravesend. Electricity generation? The UK’s Foresight Group owns solar farms at Paddock Wood, and Abbey Fields in Faversham. Transportation? Legal & General Investment Management owns parking spaces; Sweden’s EQT Partners owns charging stations for electric vehicles; PSP Investments of Canada owns train rolling-stock ...
“The faster the turnover of infrastructure and real-estate assets bought and sold by asset managers, the higher the returns. It doesn’t pay for fund managers to buy and hold the asset: it pays to buy it, and then sell it for a quick profit. They do whatever is needed to grow the incomes (such as rents or water rates) that the assets generate. They cut to the bone the costs incurred in operating those assets. Eying quick disposals, they have little interest in carrying out asset maintenance or repair for the long term.
“The dire consequences for the ordinary households whose lives are embedded in this asset manager-made world barely need stating. Being dependent on a real asset acquired by an asset manager – for shelter, energy supply, water or transportation – generally means higher costs and poorer-quality service, followed by considerable disruption when ownership changes hands just a few years later.”
