FTI Journal

The Experts

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Industry Viewpoint - Fall 2009

What Next for Private Equity?

After seeming to achieve eye-popping returns year after year, the U.S. private equity industry stumbled in 2008 (like almost every other sector of the financial services industry). Returns were nearly 30% lower than they had been in 2007. And the news in 2009 hasn’t been much better – in the first six months of the year, only $24 billion worth of private equity deals were completed (globally). In 2008, the equivalent figure was $131 billion. In 2007, it was an astonishing $528 billion.

These developments have been a catalyst for private equity firms to adopt new methods. They are taking on less leverage and assuming less risk. That’s to be expected, given recent events. But peering further into the future, the largest private equity firms have $400 billion worth of debt maturing over the next five years. In an environment marked by less risk, less leverage, and thus the likelihood of lower returns, how difficult will it be for these firms, and their smaller brethren, to settle their accounts?

That is one of many unanswered questions about private equity. For an informed perspective on emerging trends that could be shaping the industry’s future, the FTI Journal asked six experts to offer up their thoughts about where private equity goes next. Edited excerpts of their responses follow.