THE OBSERVER: Old and vulnerable people and financial whiz-kids don’t mix

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Professor Karel Williams at Manchester Business School argues there is a fundamental mismatch between the risky, high-return world of private equity and care homes, which are more suited to low-risk, low-return, long-term financing. Private equity financiers typically expect returns of 12%. This sort of figure simply becomes impossible in the crunch situation of falling state funding and rising costs. “In the event of liquidation, the owner can walk away after losing only a small amount of equity, offset by any cash extracted since purchase, and the state is left with responsibility for the residents,” Williams says.