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Has Private Equity reached its peak?

Fears grow as assets held by private equity firms grows 83% in past decade

has private equity reached its peak

“Credit conditions are not as good as they used to be and there are so many people in the game.”

“Valuations have gone through the roof. Returns will have to diminish.”

The above statements by Peter Gale – Hermes GPE Head of Private Equity Investments don’t make good reading for private equity.


Private equity has been a great way to find returns, but it’s started to become overworked.

Many are predicting private equity has hit its peak due to high valuations for leveraged buyouts.

Private equity has achieved double figure returns for the past decade, but even the biggest and brightest are predicting its decline, including Morgan Stanley.

“Returns are coming down”

According to the Head of Policy Research at State Street Global Advisors Elliot Hentov.

“A lot of money is going into that space and we are seeing excess returns shrinking.”

In the words of Ben Meng Calpers CIO – “When you have so much liquidity available, naturally the price for illiquidity will come down”

Feeling the swelling

Pension fund – California Public Employees’ Retirement Systems have felt the impact more than most.

Their private equity portfolio was down 16.1% on the previous period, something they saw coming 2 years ago and adjusted for.

Their private equity portfolio delivered just 7.7% in the fiscal year.

Co-CEO of consulting firm Meketa Investment Group Stephen McCourt spoke about the influx of cash swelling the industry; “With so much money flooding the market, the problem is, how to achieve scale in the asset class in a very competitive, illiquid market environment.”

According to data collected by;
Assets held by private equity firms swelled 83% in the past decade.

Morgan Stanley Wealth

Morgan Stanley Wealth Management have historically claimed that an industry has hit its peak once there are high valuations for leveraged buyouts.

Lisa Shalett is Chief Investment Officer at Morgan Stanley Wealth and had the following to say;

“Higher buyout valuations signal lower returns. We think we have reached a peak in the private equity market”

“Investors tempted to chase the double digit returns that many earned in private equity investment vehicles this past decade, need to downgrade their expectations. The environment for private investing has gotten tougher.”

AlternativeSoft is an award-winning quantitative analytics software specialising in asset selection, portfolio construction and customised reporting. To find out more or register for a free demo, get in touch with our team.

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