Dear Reader
Seasoned observers were predicting earlier this year that fallout from the subprime crisis in the US would trigger an abrupt end to the private equity party. Coming on the heels of a rash of regulatory scrutiny and growing calls for private equity firms to pay more tax, the credit squeeze that accompanied the subprime crisis could, they argued, bring the private equity industry to its knees.
As we find out in this month’s cover story, the reality could hardly be more different. Calls in the US for tighter regulation and revised taxation of private equity funds faded out amid concerns that such changes might cramp the industry’s style and add yet more instability to an already tottering economy. The capital private equity funds have been deploying so effectively has not gone away, and the opportunities for investment seem only to be growing.
The private equity industry’s experience epitomizes the sharp recovery of confidence across many markets and industries in the past two months. In markets around the globe, wide-eyed investors have emerged from their bunkers to find that the financial world didn’t spiral into oblivion, as they had feared it might.
The current optimism is well founded. The recent crisis directly affected only a small portion of the global financial system, and those who suffered worst were mostly those who took the most imprudent risks. But investors, scathed and unscathed alike, should remember they can still get burned even when they haven’t been playing with fire.
Until next month,
Dan Keeler
dan@gfmag.com
