Abstract
Many children who seemed to have left home for good are returning, embodying the phenomenon of the “boomerang kid” (Taylor 2024). The reasons are very simple and increasingly widely understood: “despite the historically high employment rate in the United States in 2019, approximately 46.3 percent of all renter households were cost burdened, spending more than 30 percent of their income on housing. Moreover, 23.9 percent are severely cost burdened and pay more than half their income for housing” (Kang et al. 2024: 232). Increasing shortage of supply relative to demand has contributed to this cost burden: “The median rent grew 16 percent from 2001 to 2019 while the median renter’s income only grew 5 percent” (Yeakey 2024: 506). Such trends have continued under the Biden administration, whose domestic popularity has suffered largely because of what has elsewhere been described as a cost-of-living crisis, despite historically low unemployment levels (Jones 2024).
If the asset management industry has its way, boomerang kids and the never-left will become a more global phenomenon. In Our Lives in Their Portfolios, Brett Christophers shows both the scale of the sector’s colonizing ambition and the scope of its parasitical feeding off the essential infrastructure of modern life. Bruce Flatt, CEO of Brookfield Asset Management, predicts that by the year 2058 “most infrastructure in the world will be transferred to private hands” (293). This has geopolitical implications, outlined below.
Christophers defines asset managers as “private financial firms that manage money on behalf of investors, typically institutional—as opposed to household or “retail”—investors, and in particular pension schemes and insurance companies” (6). The modus operandi of asset management bears very close similarity to that of private equity: “asset managers are relentless in squeezing maximum profits out of the homes and infrastructure they own” (8); “asset managers both buy and sell housing and infrastructure assets.. . . Selling is as much a part of the business model as owning” (9). They also happen to be largely invisible to the general public (9). Yet Christophers situates private equity—“asset managers that happen to invest mainly or exclusively in the private-equity asset class” (10)—as a subset within a much larger spread of activities that comprise trade, ownership, and management of private and public assets. This underscores the analytically slippery nature of the financial sector with respect to materialist analysis of its political orientations, given interests that are diverse and not necessarily aligned, even when belonging within the same organization (Benquet and Bourgeron 2022).
Christophers focuses attention on “real” or “alternative” assets, as opposed to financial assets (16). The ownership of the latter by mutual funds and exchange-traded funds has been characterized as “asset manager capitalism” in a recent and much-cited paper (Braun 2022). Another application of the “assetization” concept is featured in recent work that examines the transfer of risk onto households and the impact of this on the choices facing individuals and families as states’ welfare provision and the labor share are cut back (Adkins et al. 2020; Bryan and Rafferty 2018). Christophers instead depicts an “asset-manager society” in which social life is becoming reshaped by the changed ownership and management of essential infrastructure (15). By this is meant housing of various types and the physical apparatus that enables and sustains modern life, including water supply, waste disposal, energy, food production, schools and hospitals, and transport networks (17). Things “that are nothing less than foundational to our daily being” (7) are increasingly owned and operated at the behest of asset managers, whose squeezing of profits is having predictably deleterious consequences for those dependent on these assets.
Asset management is organized on the basis of an investment fund, through which business is conducted (28). Like private equity, the capital of multiple investors is aggregated to form the basis of a legal entity “with a stated focus on one or more asset types, and often also a particular geographic focus” (23). The asset managers themselves “almost always invest some of their own money alongside that of their clients” (25), but not so much (“between 1 and 5 per cent of the total”) that they would take risks proportionate to those of their clients (26). Like private equity, management fees provide the general partner (GP) a stronger protection against risk, and they are comparable (between 1 and 2 percent annually), as do performance fees (“usually 20 per cent”), although the basis of these fees varies according to the fund and the “activeness” of its management (54–56). The funds are incorporated separately, usually as limited partnerships, because of this legal form’s tax treatment: “tax is incurred by investors on distributions from the fund” (26). Meanwhile, the GP is a separate entity “(usually another partnership) constituted and owned” by the asset manager (27). Most are unlisted. Christophers acknowledges the existence of listed funds, but treats those as external to his concept of asset manager society because of their more passive approach, such as taking minority holdings in firms operating within a specific sector, like real estate. Accordingly, their fee structures are more modest, and their wider influence is considerably less than the unlisted, opaque, but very active asset managers under scrutiny here (58).
Christophers observes that asset manager society “is, in reality, a highly complex and heterogeneous landscape” (30), made murkier by the legally assisted opacity that is the hallmark of “alternative finance” (Benquet and Bourgeron 2022). To provide as orderly and comprehensive a rendering as possible, Christophers defines three “main types” of institution: (a) “pure play” entities, such as Blackstone, that focus mainly or exclusively on asset management, whether as specialists, generalists, or something in between; (b) diversified financial services companies active across a range of activities, where these might not only operate their own asset management entities but also are clients of asset managers; and (c) operating companies that are focused on the ownership and operation of specific asset types (e.g., infrastructure) and which invest their own capital as well as manage investment funds for third parties (30–33).
One of the signal changes wrought by neoliberalism has been the “opening” of economies, such that the post-1945 Keynesian era’s characteristic reliance on domestic sources of finance (whether private sector, state, or municipal) was replaced by a deliberate dependence on foreign investment. Instead of the traditionally low-cost borrowing of the state used to finance entire projects, greater reliance on private sector financing became standard policy, whether for developing or developed economies (OECD 2002, 2015). The inflated costs of these arrangements for taxpayers are by now firmly established (Gaffney et al. 1999; Ford 2019) and admitted even by the politicians who facilitated them (Billingsley 2011). Yet instead of acting upon this recognition, governments continue to seek private financing.
A particularly egregious but illustrative example of this legalized parasitism is the saga of UK utility Thames Water (TW). Privatized in 1989 along with the other regionally organized water authorities in England and Wales, it is a case study of how infrastructure assets, the ultimate natural monopoly, were “sweated” to the extent that its former owners (Macquarie, based in Australia and a major player globally) were enriched by its share of dividends totaling £2.7 billion even as the “asset” in question increased its debt from £3.4 billion to £10.8 billion during this period (2006–2017). Macquarie claims not to have exercised any influence over TW since its sale, despite the fact that Macquarie, via its private credit funds, holds approximately 9 percent of TW’s holding company Kemble’s assets (Plimmer and Smith 2024). The crisis at the firm, long brewing, was formally triggered by the default on interest payments on £400 million by Kemble Water Finance, “one of the holding companies that owns Thames Water” and “part of the labyrinthine corporate structure built at Thames by its former owner, Australian infrastructure investor Macquarie.” The remaining “nearly £15bn of debt held by the Thames Water utility companies that sit below Kemble should be unaffected by the default” (Smith 2024).
Shareholders are refusing to pump an additional £500 million into TW unless the regulator allows the utility to raise bills by 56 percent in real terms by 2030. The specter of state ownership having been raised, the regulator is in fact “drawing up plans for a special ‘recovery regime’ for Thames Water and other financially stressed water companies in a bid to avoid nationalization,” with “more ‘realistic’ targets for reducing sewage and water leaks, and outages, in exchange for more regulatory oversight for a period of up to five years.” The regulator, mindful of the moral hazard involved here, is nevertheless said to be “keen to put these companies on an upward trajectory” (Plimmer 2024).
Christophers summarizes the “Golden Rules of Asset-Manager Society” as (a) maximize revenues to maximize market valuation; (b) minimize operating costs of the asset to maximize cash flows; and (c) avoid capital expenditure where possible (196–202). The example of Thames Water follows this playbook, and shows the financial health of investors to be of evidently greater import to the state than the health of those drinking or swimming in the waters that are the responsibility of a sector that, as the regulator’s “recovery regime” plan implies, is close to TW’s parlous condition.
Christophers explains the wider implications in the closing chapter. The Washington Consensus that imposed the failed structural adjustment plans on developing countries was emblematic of neoliberalism’s brutal “integration” of “emerging markets” into the globalizing economy (Fischer 2003). Today a new “Wall Street Consensus” is emerging as Western-backed development policy, having been tried and tested primarily in the Anglosphere and conceived as a “strategic Western response” to China’s Belt and Road Initiative (Gabor 2021: 454). As is increasingly often the case, it is not clear how Western leaders expect to compete with such an inferior offer. China’s bilateral lending conditions are considerably less stringent (and often accused of opacity—see Cormier 2023), while its enterprises are prepared to share intellectual property and engage in the sort of knowledge transfers that benefited China’s own foreign investment–funded economic rise (Olcott 2024). Yet, the supposed “return of the state” following the coronavirus pandemic via such initiatives as “Build Back Better” is in fact “Western governments ‘escorting’ Global North asset managers into de-risked infrastructure assets in the Global South” (261). This was enshrined as official G7 policy in 2022 as the Partnership for Global Infrastructure and Investment, and featured strongly in the June 2024 G7 summit in Fasano, Italy. The list of projects announced under its auspices (White House 2024) was supported by the World Bank, Microsoft, and BlackRock—not at all woke, but simply following the money. As for what distinguishes the Wall Street Consensus from its earlier Washington counterpart, according to BlackRock CEO Larry Fink, the International Monetary Fund and World Bank should be insurers, rather than financiers, “reducing risk for private investors (like BlackRock) via mechanisms such as first-loss guarantees” (285).
Christophers has written a compendious account of a little understood but vitally important area of finance that is quietly spreading its tentacles throughout what used to be called the public sector. Among other services performed by this book, it is a signal warning of the “BlackRockification” of not only climate policy (295) but of how assets are being acquired for the purpose of value extraction with the full cooperation of state actors that loudly proclaim the benefits of democracy abroad while subsidizing, protecting, and promoting a business model whose elaborate, deliberately complex and opaque legal structures, financial reporting and tax treatment amount to little more than a well-disguised but very effective shakedown.
