Skip to content
Opinion
Nir Kaissar

Private Equity’s Goldilocks Era Is Coming to an End

If the bear market persists, the industry will have to concede that its investments have declined in value, and the writedowns could be substantial.

Private equity faces a reckoning in a persistent bear market.

Private equity faces a reckoning in a persistent bear market.

Photographer: Aaron Chown/PA Images/Getty Images

The longer a bear market drags on, the better the chance that pain will spread beyond stocks. So with the US bear market entering its seventh month, it’s not too soon to think about what other risks might be lurking. Private equity is at the top of the list.

The private equity industry, which as its name implies invests in shares of private companies, has ballooned into a sprawling, high-powered, moneymaking machine over the past four decades. In the 1980s, it could legitimately claim to be a small club of rich investors, but no more. Data around private equity is scarce because its dealings are, well, private, but available numbers give a clear enough picture of its enormous scale.