Predictions for a new decade (Editor's letter)

Happy new decade. The processes and people that make private equity firms run smoothly will multiply over the next decade. Here are some of my predictions for what lies ahead over the next 10 years, and what this means for the readers of Private Equity Manager:

• Returns will come down: Firms will be forced to add operating and other “dashboard” style resources in order to compete. These are people and resources that will need to be managed internally.

• Costs of business will increase: Being a private equity firm will become more expensive. Firms will need to hire more people to stay on the right side of a new raft of rules and regulations around the world. Taxes on carried interest, capital gain and personal income will make private equity less lucrative, but for those who succeed, still highly enriching.

• Non-Western markets will blossom: Even medium-sized firms will expand to what ultimately will no longer be called “emerging markets”. The risks associated with these expansions will need to be carefully managed.

• Fundraising 2.0 will emerge: The old model of touring 20 US cities with a flip-book endures, but becomes in most cases insufficient for sustained success. New professionals, new services and new modes of communication rise to connect capital with opportunities in ways that surprise old-timers. Specialists in certain niche markets gain influence. 

 • Fundraising and marketing professionals will become even higher-profile rainmakers within their firms: Take a look at major mutual fund companies – many of them are run by people from the marketing side. As the decade progresses, many “deal guys” will find themselves working for IR honchos, and not the other way around.

• The public private equity firm will win fans: A platform that at first seemed like a contradiction will further reveal its utility. Trading publicly gives firms a higher profile and a valuable currency for compensation and expansion. These firms “crack the code” on sourcing public capital for private investment, a major breakthrough that puts a cluster of GPs well ahead of the others.

• GPs will appear “in their underpants”: Transparency will move to new extremes as public firms set the pace. GPs will become comfortable that their competitive advantages comes not from secrecy, but from experience, judgment and hard work.

Enjoy your PEM Monthly,
David Snow
Executive Editor
David.s@peimedia.com