Private Equity/Credit: The Bubble and its Implications

My last few blog articles have been on the private equity industry, and further digging in recent days led me to the discovery of Dan Rasmussen. He has some excellent insights on private equity and has made a number of useful podcast appearances outlining his thoughts on the subject (available on YouTube), which I have spent the past day or so devouring. They come highly recommend.

His conclusions broadly mirror my own more intuitive conclusions, but he is in possession of more hard facts and data; has first-hand experience working in the industry (at Bain); and was able to put some extra nuance around various issues I was previously lacking. I appreciate his important contributions. I have incorporated many of his insights with my own into this narrative take on where we are, and how we got here, and what the future may hold for the PE/PC industry. I hope you enjoy!

Tertiary PE LP buyout funds scale new heights of absurdity

In a recent post (as well as some from yesteryear), I discussed how many private equity (PE) funds have been systematically overvaluing their assets/NAVs, and that this is the real reason why they are struggling to realize assets (including via IPOs) and deliver cash distributions to their LPs (limited partners aka investors).

Where are all the IPOs? The great private equity ruse

Consider that both of the following claims appear to be simultaneously true:
*Stock markets are expensive and therefore ought to be receptive to IPOs, and yet there are relatively few.
*Private equity funds (including venture capital) are struggling to achieve "exits" and return meaningful capital to their increasingly-impatient investors - to such a degree they are resorting to shuffling assets into "continuation funds" and taking on margin loans to fund distributions.

Artificial Intelligence or Authentic Stupidity?

Over the past three years, the AI/LLM boom and its associated capex supercycle has been having a profound effect on the economy, financial markets, and society (though not on corporate productivity, as we’ll discuss). However, as unrestrained AI optimism and its financial market manifestations have continued to mushroom, evidence has been quietly mounting that many of the boom’s foundational assumptions are starting to buckle. The divergence between the two has become so stark that there is a strong case to be made that the boom has now morphed into a fully-fledged bubble, and of a size that makes the dot.com bubble look positively quaint.