Editor’s Letter

Abstract

Dave bliDe Publisher This Spring 2019 issue of The Journal of Private Equity represents 5,147 private capital funds an increase of more than 40% from 3,484 funds in the market between 2009–2019. A high percentage of the fundraising, especially in North America and Europe, targeted infrastructure and natural resource investments—sectors less sensitive to a slowdown in economic activity. The resurgence in economic activity since the Global Financial Recession in 2008 has contributed to the strong rise in valuations. Thus, 2018 saw a record 5,106 private equity-backed buyout deals up from 4,829 in 2017. The economic recovery over the past decade has helped private equity outperform public equity indexes. This outperformance, was evident particularly in 2018 as public markets became severely impacted by rising interest rates and unexpected economic and political uncertainties. Last year, private equity experienced a positive exit environment which resulted in large distributions to their investors. Thus, growing new and established wealthy investors continue to favor private equity because of this gap in returns. However, as suggested in the front cover quote, high valuations may compress net IRR when it is time to reward LPs and other investors. This compression might narrow the private equity premium over public markets especially if any expected global economic slowdown for 2019 is short-lived, and LP and other investor pressures continue to increase creativity and additional f lexibility in GP fees. This month the annual 2019 Preqin Global Private Equity & Venture Capital Report will be released with a forward by Mark O’Hare, CEO of Preqin. Mr. O’Hare begins by identifying four fundamental forces that have helped the private equity asset class expand and contribute to the global economy. First, Mark identifies the importance that the private equity governance model combines closely engaged mediumto long-term active owners that provide capital, leadership, and technical skills, and energy to lead the companies they invest into performing successfully. Second, O’Hare points out that major global investors must meet their return requirement in an increasingly lower-return environment. Nevertheless, third, Mark emphasizes that private equity has consistently delivered superior risk-adjusted returns compared to public markets. Moreover, the fourth point Mark reinforces that a virtuous circle of LP earnings from private equity portfolios since 2011 has driven the fundraising environment as LP’s have made new private equity fund commitments and investments. The result has been to