104
New Labor Forum 32(3)
as Henry Simons (University of Chicago) and
Joseph Schumpeter—neither known for their
radicalism!—will prove most compelling to
those interested in the history of economic ideas.
These essays illustrate, among other things, just
how wide ranging among economists was the
concern with finance, crisis, and capitalist
development through most of the twentieth century. Just as valuable are Whalen’s observations
on how Minsky can help us think about what he
calls an “Economic policy for the real world”—
and how to think concretely about the urgent
task of reforming the financial system.
Running through all the essays in the book
is Whalen’s conviction that the needs of working people must always be placed at the center
of economic analysis. Ultimately, however, it
may be the case that only a sustained working-class movement can force labor’s issues
onto the agenda of economic research—and,
more importantly, of economic policy. The
foolishness that marks so much of the modern
economics profession did after all emerge in
the context of union decline. From that perspective, the fate of the new wave of heterodox economics may depend as much as
anything on what becomes of the exciting
organizing developments of recent years. In
any case, Reforming Capitalism for the
Common Good is an invaluable resource for
everyone interested in what that field could
and should look like in the future.
ORCID iD
Samir Sonti
1670-7521
https://orcid.org/0000-0003-
Author Biography
Samir Sonti is an assistant professor at the CUNY
School of Labor and Urban Studies and Books and
Arts Editor of New Labor Forum.
Here for a Good Time, Not a
Long Time: Asset Managers at
the Infrastructure Party
Our Lives in Their Portfolios: Why Asset
Managers Own the World
By Brett Christophers
Verso, 2023
ISBN: 9781839768989
Reviewed by: Jim Kane
DOI: 10.1177/10957960231193763
On April 3, the trade journal Chief Investment
Officer published an article entitled “Why
Infrastructure Investments Are the New Bonds.”
Institutional investors, it noted, have increased
their allocations to infrastructure of all kinds,
enticed by a mix of steady cash flows and protection against unexpected inflation. From the
vantage point of the magazine, infrastructure’s
primary role is not to provide electricity, clean
water, or bus service to the public but to help
institutional investors meet their liabilities.
Books and the Arts
Brett Christophers’ Our Lives in Their
Portfolios: Why Asset Managers Own the World
maps the global rise of asset managers’ control
of infrastructure and other real assets central to
our daily lives. It is also a critical account of the
structural problems with these arrangements.
Drawing on industry publications and academic
literature across several disciplines, Christo­
phers demonstrates that asset managers such as
Brookfield have been among the main beneficiaries of several processes that stretch back
decades: the decline in public ownership of “the
basic physical building blocks of global society
and economy,” low interest rates that followed
the global financial crisis, and an ideological
project to present finance as capable of filling
the “gap” between public investment and public needs. The irony, Christophers argues, is that
asset managers are largely obligated to buy and
sell on short timelines, making them among the
most ill-suited owners of these long-lived
assets.
Christophers argues that we live in an “asset
manager society”—one in which financial
firms control “our most essential physical systems and frameworks.” He contrasts this concept with Benjamin Braun’s notion of “asset
manager capitalism.”1 Braun’s framework
describes the latest regime in the corporate governance of publicly traded corporations: broadly
diversified large asset managers such as
BlackRock are now among the largest shareholders of every company in most markets—
universal owners. Theirs is a low-fee model,
and they compensate for low fees with scale
and universal ownership. As a result, they exercise a degree of control within firms not through
majority ownership or the threat of exit, but
through voting power. By contrast, the key
players in the asset manager society exercise
both outright control—via majority ownership
or long-term contract—and exit to generate
returns. In this respect, the asset manager society resembles the private equity buyout world.
Many of the same firms are active in both
realms, and the funds involved, as well as the
assets they acquire, are exempt from key public
reporting requirements.
As Christophers shows, the line between his
asset manager society and Braun’s asset
105
manager capitalism can be blurry. An asset can
move between the two spheres and into others.
In the example of Invitation Homes, which
Blackstone created to acquire single-family
homes after the global financial crisis, assets
(single-family homes) first moved from the
hands of distressed homeowners into the asset
manager society. Soon enough, they became
part of the asset manager capitalism regime as
Invitation Homes was listed on the public markets and Blackstone gradually sold off its controlling stake. Asset managers, other financial
services companies, and the largest of pension
funds can themselves straddle the line between
the two spheres. BlackRock, a major player in
asset manager capitalism and among the largest shareholders in most publicly traded firms,
also sponsors private funds that invest on
a much smaller scale in the asset manager
society.
. . . [A]sset managers are largely
obligated to buy and sell on
short timelines, making them
ill-suited owners of . . . long-lived
[infrastructure]assets.
Blackstone, Brookfield, and Macquarie are
among the main protagonists in Christophers’
story. They regularly raise funds with billions
of dollars in committed capital and gobble up
infrastructure of all kinds—energy and water
utilities, telecoms, transportation systems, hospitals, and schools—along with housing and
farmland. By the author’s estimate, these firms
control about $4 trillion of holdings in the asset
manager society.
Christophers’ geographic mapping of the
capital sources and investments may be the
most comprehensive picture of this system that
we have to date. Funds are raised primarily
from institutional investors—public and corporate pension funds, life insurance companies,
endowments, and foundations—as well as
wealthy individuals in North America, Europe,
and to a lesser extent the Asia-Pacific region.
Latin America, Africa, and the Middle East
contribute only a few percentage points of total
investment, although sovereign wealth funds in
106
the latter region are increasingly prominent. To
a certain extent, the map of investments mirrors
that of the capital sources, but Christophers
carefully highlights regional variation and
uneven historical development. Additionally,
he brings into focus a “push and pull” dynamic
in which public-sector austerity has gone hand
in hand with the growth of funded pensions and
other institutional capital pools. For example,
Australia became the birthplace of infrastructure as an asset class during the 1990s, when the
government withdrew from funding public
infrastructure and retirement funds were seeking the kind of steady cash flows and inflation
protection that infrastructure promised.
Macquarie rose to prominence on the back of
this development.
Christophers’ geographic
mapping of the capital sources
and investments may be the most
comprehensive picture of this
system that we have to date.
Christophers’ core thesis is that asset managers operate on timelines too short to make them
responsible stewards of basic infrastructure.
Despite the stated desires of institutional investors to pair their “patient capital” with the longlived assets of the asset manager society, the
majority of committed capital flows into
closed-end funds with a stated life of ten to
twelve years. Investment holding periods—the
length of time that a fund owns an asset—are
often less than five years. Although the closedend fund is common to other parts of the private
equity world, the horizon mismatch with these
long-lived assets is glaring. Take the 2012
agreement between the city of Bayonne, New
Jersey, and a joint venture that included the
asset manager KKR. The two sides agreed that
the joint venture would run the municipal
waterworks for forty years. However, KKR’s
capital came from a closed-end fund raised in
2011, meaning that its exit in 2018 was
“preordained.”
Christophers argues persuasively that the
funds’ short timelines discourage significant
capital expenditures. Faced with the need to
New Labor Forum 32(3)
unload an asset in a few years, it is a safer bet to
cut costs to improve free cash flow. Moreover,
closed-end funds are often compared on a performance metric, the internal rate of return
(IRR), that creates perverse incentives. The
sooner a fund makes a distribution or payment
to investors, and the larger that distribution is,
the more the IRR rises. As a result, asset managers have every reason to make early distributions at the expense of productive investments.
When Macquarie acquired Empark, a car park
operator, it did just that, issuing a debt-financed
dividend or “recap.”
Beyond the “tragedy of horizon,” these
investment vehicles and adjacent structures
facilitate tax avoidance. Funds themselves are
usually structured as limited partnerships, generally not subject to taxation. Taxes are further
limited by operating through real estate investment trusts (REITs) and assuming high levels
of debt that offset otherwise taxable income. In
another maneuver, firms arrange shareholder
loans in which the asset owner also provides
debt financing, siphoning off cash flows and
reducing taxable income. These loans can also
be structured in ways that take advantage of
low-tax jurisdictions.
Finally, Christophers refutes industry claims
that private investors outperform governments
in efficiency and cost effectiveness. Gover­
nments have access to low-interest credit, and
very often, private contracts include revenueguarantee clauses that bleed the public sector.
In 2008, the city of Chicago signed a seventyfive-year concession agreement with Morgan
Stanley Investment Partners to run the city’s
metered parking system. The city aimed to
move the costs of the operation off its books,
but the agreement required it to pay penalties
whenever it took a meter offline, ensuring that
investors made money even if the system
shrank. The terms of the contract transformed
the meter system from a revenue source to a
budget expense for the city. Christophers draws
on urban sociology scholarship to show that
this was not just costly but also disrupted other
aspects of the city’s planning process, including
the rollout of the bus rapid transit system.
Who benefits from these aggressive maneuvers? Certainly not the states or the public that
Books and the Arts
use the infrastructure. Asset managers love to
trot out the “teachers, nurses, and firefighters”
trope, arguing that public pension funds are
limited partners in their funds, and that workers therefore reap the rewards of financialization. In reality, however, these funds distribute
upward, reinforcing and even exacerbating
economic inequality. Borrowing a convention
from the buyout world, asset managers standardly supply just a few percentage points of
the committed capital in a fund but receive 20
percent of the profits, allowing for enormous
capital gains relative to contributions. This has
been described elsewhere as holding a call
option while controlling the volatility of the
underlying asset.2 Moreover, as Christophers
notes, asset managers charge high steady management fees—the “bread and butter” of the
industry.
While Christophers does not outline a plan
for dismantling the asset manager society, the
threads are there for both practitioners and academics to pull on. Most importantly, the design
of our retirement system fuels the growth and
political power of asset managers. Public pension funds once operated on pay-as-you-go or
“fiscal mutualist” bases in which their ability to
pay depended on the permanence and economic
health of states and cities. But over the last fifty
years, public pensions have become funded
systems much like corporate pension plans.
Founded on the reality that private firms are
much more likely to go bankrupt and may be
liquidated, funded pensions rely on massive
pools of capital—contributions that pension
funds hand to asset managers to invest.3 Today,
many public pension funds take the advice of
investment consultants who have an interest in
the growth of the asset manager society: some
consultants have their own asset management
arms, and others have been acquired by asset
managers. Some large public pension funds
belong to the Global Infrastructure Investor
107
Association, a trade body that argues for the
superiority of private ownership. In
Christophers’ story, we see the consequences of
these entanglements. Public pension contributions travel a circuit: they become committed to
private funds that invest in the asset manager
society, and they provide asset managers with
the political power to win subsidized government contracts that “de-risk” their investments.
It is not a stretch to say we are negotiating
against ourselves, and it should not be a stretch
to imagine returning to a system that cuts that
circuit.
ORCID iD
Jim Kane
4253
https://orcid.org/0009-0001-7566-
Notes
1.
2.
3.
Benjamin Braun, “Exit, Control, and Politics:
Structural Power and Corporate Governance
under Asset Manager Capitalism,” Politics &
Society 50, no. 4 (2022): 630–54.
“The Rigged Game of Private Equity,”
November 15, 2019, available at https://www.
creditslips.org/creditslips/2019/11/the-riggedgame-of-private-equity.html.
Benjamin Braun, “Fueling Financialization: The
Economic Consequences of Funded Pensions,”
New Labor Forum 31, no. 1 (January 2022):
70–79. For the longer history of how US pension funds shifted from investing in bonds to
broader financial assets, see Sean Vanatta, “The
Financialization of U.S. Public Pensions, 1945–
1974,” November 8, 2022, available at https://
ssrn.com/abstract=4271045.
Author Biography
Jim Kane is a senior pension specialist for the
National Education Association. He previously held
capital stewardship and research roles at UNITE
HERE and the RWDSU/UFCW. (The views
expressed here are his own.)