Hedge funds have killed Sears and many other retailers

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The primary owner of Sears (SHLD) was hedge fund manager Eddie Lampert. His ESL Investments was a controlling stakeholder in Kmart following its own bankruptcy in 2003 and then merged it with Sears.
Scroll through the list of some other high-profile retail bankruptcies, and you'll notice that Sears is not only one of the supposedly smartest guys on Wall Street.

Many well-known retailers have been able to deal with debt, making existing problems even worse.

KKR and Bain Capital Vornado Realty Trust. Toys 'R' Us, which closed its doors for good this summer, was backed by private equity firms.

Bain was also the primary investor in kids' clothing retailer Gymboree, which has been banned as part of the reorganization.

The slow, painful death of the mall – and many of its big supporters

Payless ShoeSource, owned by San Francisco private equity firms Blum Capital and Golden Gate Capital, went bankrupt last year and wound up close 700 blinds.

But wait. There's more! RadioShack, backed by Standard Standard hedge fund, has gone bankrupt twice since 2015. The hedge fund arm of Wall Street firm Blackstone (BX) owns struggling New York grocery chain Fairway, which filed for bankruptcy in 2016.

The carnage does not end there. Private equity ownership has been particularly brutal to once-popular mall-based retailers. The Limited, Wet Seal, Claire's and Aeropostale all went private equity or hedge fund backers.

Leonard Green & Partners in 2006, shutting down for 2016 – Leading to the loss of 14,500 jobs.

"Hedge funds are systematically destroying jobs across the nation," said Carrie Gleason, campaign manager for Rise Up Retail, a worker advocacy group.

"From Toys 'R' Us to Sears, these financial predators are extracting the value of these retail establishments," Gleason added.

Failure to take online shopping threat seriously hurt many retailers too

But bloated balance sheets were not their only problems. Poor strategies did not help While Amazon (AMZN) may not have necessarily been the sole reason for the collapse of Sears, the rise of digital shopping was certainly an issue.
Some big retailers, like Walmart (WMT) and Best Buy (BBY), have built robust oniine and mobile shopping operations. But Sears and many of the others that went bankrupt to adapt to changing retail trends. A physical store is no longer enough.

"Brick-and-mortar retailers are fighting over a shrinking pie," said Jack Ablin, chief investment officer with Cresset Wealth Advisors.

Ablin added that many private equity investors lack the expertise to effectively make the shift from traditional to online retailers and that they were also reluctant to commit capital to the long-term to transform these struggling retailers.

Sears is the fifteenth retailer for this year, Ablin noted. It joins other high profile private equity backed casualties Toys "R" Us, Nine West and quirky Brookstone retailer gadget.

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