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Chicago Fed Letter, No. 256a, November 2008
Navigating the New World of Private Equity—A Conference Summary
The recent financial turmoil has dramatically altered the landscape for private equity, particularly in the buyout sector. The diminished outlook for corporate profitability has altered projected returns and payback periods for investments in both the public and private domains. Leverage is less available and less attractive as a financing source for transactions. Financial institutions have reacted to stress on their balance sheets by tightening terms, raising prices and reducing the availability of credit. Despite these challenges, the faltering economy and the perception that investors may have overreacted to it have broadened the pool of opportunities for private equity firms. Newer opportunities include investing in financial institutions and clean technology and buying distressed loans and securities. In this way, private equity firms have contributed to restoring markets and economic activity to normality.


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