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November, No. 232a

The Federal Reserve System’s Private Equity and Merchant Banking Knowledge Center, formed at the Chicago Fed in 2000 after the passage of the Gramm–Leach–Bliley Act, sponsors an annual conference on new industry developments. This article summarizes the 2006 conference, “The Shifting Winds of Private Equity Risk,” held July 19–20.

Last Updated: 10/25/2006

Challenges for Private Equity—The Shifting Winds of Risk

William Mark, Steven VanBever

In his opening remarks at this year’s private equity conference, Michael H. Moskow, president and CEO, Federal Reserve Bank of Chicago, reviewed some recent developments in the industry and related risks. In 2005, the private equity industry continued to grow, mature and become more mainstream. This growth reflects both cyclical phenomena, such as ample liquidity in the financial markets, and structural changes. One structural change is a blurring of the lines between private and public markets, as happened when a prominent private equity firm, Kohlberg Kravis Roberts & Co., raised funds through a large public offering earlier in 2006.