Deeply underfunded pensions stretching for yield in an overvalued asset class make private equity “everybody’s business.” Private equity has raised record sums and invested at record multiples over the last 5 years. Per a recent edition of Grant’s Interest Rate Observer, the pensions plans exposed to these high valuations and excessive leverage are unlikely to achieve the returns underwritten: “The disappointment will ripple far and wide.”
The p.e. party is far from over:
“‘If it’s possible, fundraising has been too good, with an unprecedented $3 trillion raised over the past five years,’ relates Hugh MacArthur, head of global private equity for Bain & Co. According to Preqin Ltd., 3,037 p.e. funds are currently seeking $948 billion in new capital, compared with year-ago totals of 1,998 funds looking for $676 billion.”