Private Equity's Future: The Elephant of Capital Scarcity

My editorial theme this month seems to be the future of private equity, from the perspective of capital availability. Institutional liquidity challenges had already made it tough for firms to raise new funds, and the Volcker Rule and proposed European regulations could take permanent bites out of the limited partner pie. So let me throw one more thing at you: What if public pensions eventually switch from defined benefit plans to defined contribution plans? I know this isn’t happening tomorrow or Saturday, but it will have to happen at some point (even if it takes a state “bankruptcy” to force the issue politically). And, when it does, private equity will lose its single-largest pool of capital.

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