Editor’s Letter

Abstract

The Winter 2018 issue of The Journal of Private Equity confirms a pattern of continuing expansion in funding power but with a second-half (particularly in the fourth quarter) slowing trend compared to the same period in 2017 according to Christopher Elvin of Preqin. Fundraising by type shows buyout, growth, and venture capital led three-quarter results with North America showing a substantial lead over the total growth in Europe, Asia, and the Rest of the World together. Meanwhile, dry powder continues to rise to $1.14 trillion as of October 2018, and Limited Partner (LP) investor’s confidence is showing signs of weakening somewhat. (Please refer to “Snapshot” at the back of this issue for more details.) US economic growth momentum is entering its tenth year driven by increasing business and government investment and growing consumer demand from a now more-fully employed labor force. Beginning in October and into November an increase in the volatility of equity markets suggests a change in expectations. October data for most of the US economic outlook indicators continue to be positive for sustainable growth, but several indicators (e.g., ISM Manufacturing Index), are turning less positive ref lecting some uncertainties creeping into future growth expectations leading into 2019. However, so far there is no confirming evidence of a recession anytime soon. Since the August (Fall issue) theme of The Journal of Private Equity there has been a significant increase in US equity market volatility. This change ref lects a rising uncertainty among investors and financial advisors. The uncertainty stems from US political mid-term elections and current US economic policy actions. The deterioration in expectations is in response to three key factors. First, the tightening monetary policy with rising interest rates raising borrowing and repayment costs on variable rate loans. Second, a growing government budget deficit elevating its financing requirement that is contributing to rising bond yields and crowding out of private sector borrowing to support business investment. Third, an appreciating US dollar, and a slowdown in global commerce resulting from rising US trade restrictions vis-a-vis our major trading partners. Much attention focuses on a deteriorating US-China relationship. One possible economic risk that may develop from all three of these actions is a potential rise in US inf lationary pressure and