Elizabeth Warren's wealth-tax proposal could spur exodus to alternative assets

Senator Elizabeth Warren’s proposed wealth tax could be a gift to an industry she has accused of looting Americans — private equity.

The Democratic presidential hopeful’s plan to fund Medicare for All, denounced by prominent rich people like Bill Gates, hinges on a 6% annual levy on accumulated wealth in excess of $1 billion. One of the few ways for the extremely wealthy to preserve capital if such a tax were enacted would be putting their money into so-called alternative assets managed by firms such as Blackstone Group Inc., Carlyle Group and KKR & Co.

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“A wealth tax is likely to result in some flow of funds away from public markets, where they can get easily valued, to investments where valuations are much harder,” said Wojciech Kopczuk, a Columbia University economics professor. “It’s possible that it will encourage higher risk, higher expected-return investments.”

Yolanda Plaza-Charres, director of investment strategy and solutions for SEI Private Wealth Management, was more specific.

“We believe that such a tax would increase the use of alternative investments in the portfolios of the wealthy and ultra-wealthy,” she said in an email response to questions.

For Ms. Warren, that would amount to an unintended consequence — one that she’s tried to address. In July, the Massachusetts lawmaker introduced the “Stop Wall Street Looting Act” to rein in private equity. The proposal would hold buyout firms liable for the debts of their portfolio companies, an idea that would

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