Editor’s letter – June 2008

George Soros is the latest pundit to conjure a doomsday scenario. Asserting that the UK’s economy looks every bit as vulnerable to recession as the US, the famous multi-billionaire currency speculator predicts that the rest of Europe will face severe strains too. He thus joins a growing band of commentators – industry leaders, economists and academics among them – who have ruminated long and hard about whether it’s right to be extremely anxious about current macro-economic conditions and come to the conclusion that, yes, actually, it is.

Listening to private equity professionals, it’s also hard to detect too many positive vibes. There is the occasional attempt to talk-up the market, but even then the tone is measured and expectations modest (note our reference to recent comments by David Rubenstein in PEO 2.0, p.92). Furthermore, it’s not just industry mavericks like Jon Moulton drawing attention to past excesses and future hardship (see p.6) – grab five minutes with a random GP and the chances are that their take on the ‘big picture’ will be less than uplifting.

Hence, it may be a little unfashionable these days to suggest that there are still grounds for optimism. But judging by the confidence that fund investors seem to have retained, it is clear that private equity still has much to recommend it. And that is largely because – no matter how bad things are in the wider world – there will always be GP groups forging ahead with bold, innovative strategies. Trust in such groups does not appear misplaced, even in the toughest of times. Which may help to explain why global investment group Apax Partners recently collected €11 billion of fresh firepower. In our Privately Speaking interview on p.46, Apax chief executive Martin Halusa tells PEI where the money will go – and why he, for one, remains confident.

Times such as these are also characterised by opportunity. With the industry having been transformed by the credit crunch, individuals can seize the reins and attempt to steer its future direction. Defenders of the asset class will attempt to demonstrate that, in the unnerving present and uncertain future, it can continue to thrive. Critics, on the other hand, may try equally hard to pilot the asset class over the edge of a cliff. The empathisers and the sceptics both have their place in this month’s Special, which looks at 50 people with the power to change private equity (starting on p.53).

Enjoy the issue,

Andy Thomsonandy.t@peimedia.com