How Private Equity Is Supporting the Nation’s Economic Recovery

Creating jobs. Encouraging sustainable growth. Expanding economic opportunity. These priorities are front and center today as the nation grapples with both recovering from the pandemic shutdowns and addressing the concerns of disadvantaged communities. The federal government has mobilized enormous resources to help hardworking families and employers across the country meet payroll and pay bills during the shutdown. To help drive and sustain the recovery will require both private sector and government resources. As businesses of all sizes are working to adapt to new economic realities, private equity is doing its part to fuel the jobs recovery and bring prosperity to communities across the nation. 

Put simply, private equity grows businesses, supports local jobs and improves communities across all fifty states. Private equity firms invest in companies that are perceived to have growth potential, and then work with these companies to expand them or put them on stronger footing. Private equity firms gather the capital to make these investments from sources including pension funds that invest on behalf of the retirement plans for teachers, firefighters and other public servants. Private equity investments usually result in better jobs, stronger companies and healthier communities.

Private equity firms are unique in that they build and maintain an expertise in businesses in every sector of our economy, including manufacturing and technology. In every sector and every state, private equity-backed companies have become mainstays of local economies. Most Americans in the course of their daily lives engage with private equity-backed companies on a regular basis, whether eating at Popeyes, staying in a Hilton hotel, booking a trip on Expedia, or relying on companies like Storable, which empowers owners of self-storage facilities to do more with technology, or RateGenius, which can help you find a better way to refinance your auto loan by working with over 150 lenders nationwide to help you save money on your car payments.

Already in the first quarter of 2020, private equity has invested $64 billion in over 1,000 American businesses – and that is just the first quarter. In a recently released study, the American Investment Council found that private equity firms in 2019 invested over $700 billion in diverse communities and industries across the country, helping to rescue, build or grow 4,841 businesses. These investments build on decades of private equity capital flowing into businesses in every sector and every state in the nation, improving struggling companies and helping companies save, expand and create jobs. In fact, private equity-backed businesses make up approximately 5% of U.S. GDP and employ 8.8 million Americans.

The reality is that private equity is woven through the economy, creating a foundation for private equity investment to play an important role in fueling the jobs recovery. Not only is private equity a critical driver of the U.S. economy, studies show that private equity investments are consistently the best-returning asset class for pension funds over the long term, securing the retirements of millions of teachers, nurses, firefighters and other hardworking Americans.

Since the beginning of March, tens of millions of Americans have filed for unemployment. Businesses across the country are unsure if they can remain viable, and far too many workers remain unemployed without a clear and secure path forward to economic stability. Private equity firms are presently providing rescue capital to struggling businesses to sustain them and their employees as they emerge from the shutdown, and retool for recovery and growth. 

Private equity backing is making it possible for companies to invest in redesigned workspaces and work protocols made more necessary by the new coronavirus. Private equity-backed companies are on the front lines of developing and testing therapies and vaccines that will further protect the health and safety of all Americans. Furthermore, private equity-backed companies are creating the technology that will facilitate the monitoring necessary to protect employees in a wide range of work environments. In other words, private equity is everywhere, enabling businesses to survive and thrive.

We do not know how the economic recovery will unfold. It will take sustained effort from the government and the private sector to get America back to work and safeguard the nation against the devastating impact of any future pandemic. Private equity is part of that solution. Investments of private capital and expertise will serve as a further form of stimulus to our economy – one that comes at no cost to the taxpayer, not now, not ever. 

Source: RealClearMarkets

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