Columbia Law School Roundtable on Public Aspects of Private Equity

The mandate of the broader private equity “ecosystem” goes well beyond earning competitive returns for the limited partners and their beneficiaries. After noting that PE investing is encountering ever larger “headline” and social risks, the panelists were in complete agreement that LPs should exert greater pressure on PE sponsors to take account of and try to address negative externalities when buying and operating their portfolio companies. Bain Capital's Double Impact Fund, for example, while always looking for ways of increasing profits and reducing risk, sets out to have a positive influence on its non‐investor stakeholders, including employees. To that end, Bain develops and tracks company‐specific metrics linked to positive outcomes, and then links those metrics to management compensation. And the director of ESG programs at the International Limited Partners Association points to ILPA's programs for diversity and inclusion as a promising model.     

The Case for Secondary Buyouts as Exit Channel

Do private equity firms have a clear pecking order when deciding on exit channels for their portfolio companies? Are secondary buyouts—that is, sales to other PE firms—always an exit of last resort? And are there company‐ or market‐related factors that have a clear and predictable influence on decisions to pursue secondary buyouts? Using a proprietary dataset of over 1,100 leveraged buyouts that exited in North America or Europe between 1995 and 2008, the authors attempt to answer these questions by analyzing the returns associated with public, private, and secondary (or “financial”) exits. Based on their analysis of the realized returns, there is no clear pecking order of exit types. Secondary buyouts deliver rates of return that are the equal of those achieved through public exits. In addition, the authors assess the relationship between the likelihood of choosing a financial exit and certain company‐related as well as market‐related factors. Portfolio companies with greater debt capacity are more likely to be sold in secondary buyouts. Furthermore, increases in both the liquidity of debt markets and the amount of undrawn capital commitments to the private equity industry increase the probability of exit through secondary buyouts.     

Morgan Stanley Roundtable on The State of Global Private Equity

In this discussion led by Alan Jones, Morgan Stanley's head of Global Private Equity, the University of Chicago's Steve Kaplan begins by surveying 25 years of academic research on private equity. Starting with Kaplan's own Ph.D. dissertation on leveraged buyouts during the 1980s, finance academics have provided a large and growing body of studies documenting the ability of private equity firms to make “sustainable” (that is, maintained over a three‐ or four‐year period) improvements in the operating performance of their portfolio companies, whether operating abroad or in the U.S. Even more impressive, the findings of Kaplan's new study (with Tim Jenkinson of Oxford and Bob Harris of the University of Virginia) suggest that these improvements have been large enough to enable PE funds raised between 1990 and 2008 to deliver returns to their limited partners that have averaged 300 to 400 basis points higher per year than the returns to the S&P 500. And given the “persistence” of PE fund returns—the tendency of the funds of the same PE firms to show up in the top quartile of performers year after year—that Kaplan has documented in earlier work, the performance of private equity seems notably different from that of mutual funds and hedge funds, where there has been little if any consistency in the returns provided by the top performers. Following Kaplan's overview of the research, four representatives of today's leading private equity firms explore questions like the following:

• ? How do the best PE firms, after paying premiums to acquire their portfolio companies and collecting large management fees, provide such consistently high returns to their limited partners?
• ? How did PE portfolio companies perform during the last recession, when many popular business publications were predicting the death of private equity—and what, if anything, does that tell us about how private equity adds value?
• ? What can PE firms do to avoid, or at least limit the damage from, the overpricing and overleveraging that tend to occur near the end of the boom‐and‐bust cycle that appears to be a permanent feature of private equity?

As Jones notes in his opening comments, the practitioners' answers to such questions “should help investors distinguish between the alpha that the firms represented at this table have generated through active management from the ‘closet beta’ that critics say results when private equity firms simply create what amounts to a levered bet on the public equity markets.”     

Private Equity and the COVID‐19 Economic Downturn: Opportunity for Expansion?

The coronavirus‐related global economic downturn poses a significant risk to PE portfolio companies, but also represents a significant opportunity to purchase quality companies at a discount. Because the industry is today much larger, as well as more diversified and experienced, than at the time of the 2008 downturn, it is better positioned not only to weather the severe economic storm, but emerge with an even larger and stronger asset base. Compared with PE at the time of the global financial crisis, today's $3.9 trillion private equity industry has considerably more dry powder, with more heavily capitalized strategies, including private credit and “secondaries,” more permanent capital, and stronger operational capabilities. In contrast with the pre‐crisis hyper‐competitive market environment in which purchase multiples were at record highs and returns faced significant downward pressure, the fear and uncertainty that characterize current market conditions have put PE in a position to grow its asset base at bargain prices. The advantages of scale, diversification, adaptability, and access to longer‐term capital are all expected to help today's larger alternative asset groups, which have in recent years achieved greater diversification in terms of strategy as well as geography and investors.     

Playing to their strengths? Evidence that specialization in the private equity industry confers competitive advantage

The paper examines whether private equity (PE)-backed buyouts have higher post-buyout operating profitability than comparable companies as a result of the alleged superior governance mechanism of private equity (“The Jensen hypothesis”) and whether relative investment specialisation by industry or stage provides the PE firm with a competitive advantage over its peers (“The advantages-to-specialization hypotheses”). A sample of 122 UK buyouts over the period 1995–2002 and a matched sample of non-PE-backed UK companies are constructed to test the three hypotheses. We find that over the first 3 post-buyout years (i) operating profitability of PE-backed companies is greater than those of comparable companies by 4.5%, consistently with the Jensen hypothesis; (ii) industry specialization of PE firms adds 8.5% to this premium, consistently with the industry-specialization hypothesis; (iii) stage (buyout) specialization does not impact profitability but may provide a spur to growth, inconsistently with the stage-specialization hypothesis. Finally, initial profitability of the PE-backed company plays a major role in post-buyout profitability, suggesting that skill in investment selection and financial engineering techniques may be more important than managerial incentives in generating higher PE company performance.     

Board 3.0: What the Private‐Equity Governance Model Can Offer Public Companies∗

The authors view board structures as an adaptive institution that responds to the key challenges faced by public companies: helping management solve the problems of production and organization of large‐scale enterprise; limiting managerial agency costs; serving as a delegated monitor of the firm's compliance obligations; and responding to the governance environment of changing shareholder ownership patterns. U.S. company board structures are shown to have evolved over time, often through discontinuous lurches, as particular functions have waxed and waned in importance. This article is part of a larger project that traces two iterations of the public company board, what the authors call Board 1.0 (the “advisory board”) and Board 2.0 (the “monitoring board”). The authors argue in particular that Board 2.0, as embedded in both current practice and regulation, now fails the functional fit test for many companies. First, it does not scale to match the dramatic increase in the size and complexity of many modern public corporations. Second, at a time of reconcentrated ownership achieved through institutional investors and increased activism, it does not have the expertise and commitment needed to resolve the tension between managerial or market myopia, or “short‐termism,” and managerial “hyperopia.” This article holds out an optional alternative, Board 3.0, which would bring to the public company board some strategies used by private equity firms for their portfolio company boards. Such “Portco” boards consist of directors who are “thickly informed,” “heavily resourced,” and “intensely interested.” Bringing such “empowered directors” to public company boards could facilitate evolution of the public company board model in response to dramatic changes in the corporate business environment. The authors also suggest possible routes for implementing Board 3.0, including the enlisting of PE firms as “relational investors” that would have both capacity and incentives to engineer changes in board structure.     

Private Equity in the U.S.: Building a New Future

Despite the recent downturn, private equity firms still have an important role to play in the global economy. At the same time, many PE firms may need to rethink their strategies. Practices that have been worked in the past may not produce acceptable returns in a future, particularly given the current constraints on financing and leverage. One source of PE's comparative advantage, as demonstrated during the recent crisis, has been the ability of the best and most experienced firms to reorganize their portfolio companies when they get into financial trouble. But in addition to their financial management skills, specialized operating expertise has become more critical to success, and those PE firms that have not acquired it are especially likely to find that past success in raising capital is no guarantee of success in the future. The authors begin by providing a brief overview of the past three decades of global private equity to identify how the market arrived at its current position. Using the findings of academic research together with case studies and interviews with PE practitioners in the U.K., the authors suggest a number of building blocks for the future that reflect the considerable success of the most reputable and experienced PE firms in increasing the value of their portfolio companies.     

What Public Companies Can Learn from Private Equity Pay Plans

Studies of private equity pay, including one by current SEC commissioner Robert Jackson, have pointed to restrictions on equity sales as a key difference between private equity and public company pay. In this article, the author argues that there is another very important difference: equity compensation in PE pay plans is typically front loaded, with top executives of portfolio companies often required to buy shares, and receiving upfront option grants on three times the number of shares they purchase. Such front‐loaded equity compensation allows PE pay plans to avoid the unintended effects of the “competitive pay policy” that have been embraced by public companies for the past 50 years. Competitive pay—targeted, for example, to provide 50th percentile total compensation regardless of past performance—has the effect of creating a systematic “performance penalty,” rewarding poor performance with more shares and penalizing superior performance with fewer shares. The author's research shows that, for public companies during the past decade or so, the number of shares granted has fallen by 7% for each 10% increase in share prices—and that, primarily for this reason, the front loaded option grants used by PE firms have provided five times more incentive (“pay leverage”) than the average public company's annual series of equity grants. What's more, to the extent that PE pay has been guided by partnership and fixed‐sharing concepts rather than competitive pay, it is the spiritual heir to the value‐sharing concepts that guided public company pay in the first half of the 20th century. For 60 years, General Motors used value sharing in “economic profit”—10% of GM's profit above a 7% return on capital was the formula for the bonus pool for many years—as the basis for all incentive compensation. The author uses the GM history to highlight four ways to improve public company incentives and corporate governance.     

The Future of Private Equity

A distinguished University of Chicago financial economist and longtime observer of private equity markets responds to questions like the following:

• ? With a track record that now stretches in some cases almost 30 years, what have private equity firms accomplished? What effects have they had on the performance of the companies they invest in, and have they been good for the economy?
• ? How will highly leveraged PE portfolio companies fare during the current downturn, especially with over $400 billion of loans coming due in the next three to five years?
• ? With PE firms now sitting on an estimated $500 billion in capital and leveraged loan markets shut down, are the firms now contemplating new kinds of investment that require less debt?
• ? If and when the industry makes a comeback, do you expect any major changes that might allow us to avoid another boom‐and‐bust cycle? Have the PE firms or their investors made any obvious mistakes that contribute to such cycles, and are they now showing any signs of having learned from those mistakes?

Despite the current problems, the operating capabilities of the best PE firms, together with their ability to manage high leverage and the increased receptiveness of public company CEOs and boards to PE investments, have all helped establish private equity as “a permanent asset class.” Although many of the deals done in 2006 and 2007 were probably overpriced, the “cov‐lite” deal structures, deferred repayments of principal, and larger coverage ratios have afforded more room for reworking troubled deals. As a result of that flexibility, and of the kinds of companies that get taken private in leveraged deals in the first place, most troubled PE portfolio companies should end up being restructured efficiently, thereby limiting the damage to the overall economy. Part of the restructuring process involves the use of the PE industry's huge stockpile of capital to purchase distressed debt and inject new equity into troubled deals (in many cases, their own). At the same time the PE firms have been working hard to rescue their own deals, some have been taking significant minority positions in public companies, while gaining some measure of control. Finally, to limit overpriced and overlev‐eraged deals in the future, and so avoid the boom‐and‐bust cycle that appears to have become a predictable part of the industry, the discussion explores the possibility that the limited partners and debt providers that supply most of the capital for PE investments will insist on larger commitments of equity by sponsors to their own funds and individual deals.     

The Capital Structure of PE‐Funded Companies (and How New Debt Instruments and Investors Are Expanding Their Debt Capacity)

The capital structures and financial policies of companies controlled by private equity firms are notably different from those of public companies. The concentration of ownership and intense monitoring of leveraged buyouts by their largest investors (that is, the partners of the PE firms who sit on their boards), along with the contractual requirement of PE funds to return their capital within seven to ten years, have resulted in capital structures that are far more leveraged than those of their publicly traded counterparts, but also considerably more provisional and “opportunistic.” Whereas the average U.S. public company has long operated with roughly 30% debt and 70% equity, today's typical private‐equity sponsored company is initially capitalized with an “upside‐down” structure of 70% debt and just 30% equity, and then often charged with working down its debt as quickly as possible. Although banks supplied most of the debt for the first wave of LBOs in the 1980s, the remarkable growth of the private equity industry in the past 25 years has been supported by the parallel development of a new leveraged acquisition finance market. This financing innovation has led to a general movement away from a bankcentered funding base to one comprising a relatively new set of institutional investors, including business development corporations and hedge funds. Such investors have shown a strong appetite for new debt instruments and risks that banks have been unwilling or, thanks to increased capital requirements and other regulatory burdens, prohibited from taking on. Notable among these new instruments are second‐lien loans and uni‐tranche debt—instruments that, by shifting the allocation of claims on the debtor's cash flow and assets in ways consistent with the preferences of these new investors, have had the effect of increasing the debt capacity of their portfolio companies. And such increases in debt capacity have in turn enabled private equity funds—now sitting on near‐record amounts of capital from their limited partners—to bid higher prices and compete more effectively in today's intensely competitive M&A market, in which high target acquisition purchase prices are being fueled by a strong stock market and increased competition from corporate acquirers.     

Operational Improvement: The Key to Value Creation in Private Equity

With credit tightening having reduced the availability of leverage and intensified the competition for new deals, the economic recession has caused many companies in private equity firm portfolios to under-perform. These changes are forcing the private equity firms to depend even more on their ability to improve operating performance to achieve their investment goals and generate attractive returns. But few PE firms have proved capable of achieving such improvements in portfolio companies consistently over time.
In this paper, the authors discuss several ways that private equity firms use their operating expertise to drive value in their portfolio companies. They also examine the analytical framework used by some PE firms when assessing and prioritizing the many operational initiatives that could be undertaken within a newly acquired company. Part of that examination involves a detailed look at how private equity firms assemble an attractive mix of operational improvement projects in their initial 100-day plans. Finally, the authors explore one of the challenges faced by private equity firms when attempting to implement operational enhancements in newly acquired companies: bringing about change without alienating company management.
The real-world application of this approach is demonstrated with a case study that shows how one private equity buyer put its operational skills into practice to help create value within a mid-sized portfolio company.     

Buyout Transactions in the German‐speaking Region: Determinants of Abnormal Performance and Unlevered Returns

This is one of the first comprehensive studies of drivers of private equity performance in the German‐speaking region known as the DACH, made up of Germany, Austria, and Switzerland. It contributes three things to private equity research: First, it explains how operational value drivers affect operational performance (operational alpha) and unlevered rates of return. Second, it whether the same relationships hold across different kinds of private equity business models (those with either organic or inorganic growth strategies; or whether PE investments are small‐cap or mid‐to‐large‐cap). Third, it distinguished between the periods before and after the global financial crisis of 2008. The authors found that (1) annualised benchmark‐adjusted EBITDA margin growth (i.e. improvement in EBITDA margin) is the most significant determinant in abnormal operational performance and unlevered returns, regardless of the business model; (2) private equity firms executing a buy‐and‐build strategy generate lower unlevered returns than those executing an organic growth strategy when the benchmark company is clearly outperformed, most likely because of limited PE managerial resources; (3) mid‐to‐large‐cap private equity firms generate higher unlevered returns and operational alphas than small‐cap private equity firms when the benchmark company is clearly outperformed, because, we believe, larger companies have a higher fixed cost leverage than smaller ones; and we have found that (4) buyout transactions exited during or after the financial crisis yield higher operational alphas but lower unlevered returns compared to buyout transactions exited before the crisis, when the portfolio company underperforms its benchmark company.     

An Investment Management Methodology for Publicly Held Property/Casualty Insurers

Investment officers of publicly held property/casualty companies wrestle with the question of how best to contribute to shareholder value. Should they view themselves as managers of a closed‐end investment company that happens to be funded by insurance underwriting? Or should they instead be investing funds primarily to defease the firm's liabilities and thus support the operations of a company whose principal value derives from its insurance activities? The authors of this article suggest that the investment policy of most insurance companies should have two primary objectives: (1) immunizing insurance reserves with a fixed‐income portfolio and (2) earning “abnormal returns” on surplus in “a responsible and disciplined” way. The latter means adhering to an asset allocation approach that takes account of the risk‐reward tradeoffs presented by a broad variety of investment types as well as the accounting treatment of investment income. Both accounting and economic considerations lead the authors to suggest that after‐tax net investment income (“NII”), as defined by U.S. GAAP, is the best benchmark of performance. While focusing mainly on the fixed income part of the portfolio, the authors suggest active management and portfolio approaches that aim to produce a growing, but relatively stable NII. Consistent with GAAP's treatment of NII (which includes interest income but excludes most capital gains) as “recurring income,” the authors argue that the market appears to assign significantly higher multiples to NII than to other sources of reported income.     

Attracting Long‐Term Investors Through Integrated Thinking and Reporting: A Clinical Study of a Biopharmaceutical Company

Faced with a large percentage of investors that chase short‐term returns, companies could benefit by attracting investors with longer‐term horizons and incentives that are more consistent with the long‐term strategy of the company. The managers of most companies take their investor base as a “given” that cannot be changed through their actions or words. Using the case of Shire, a biopharmaceutical company with a strong commitment to the goals of improving the safety of its products and the reliability of its supply chain, the authors of this article suggest that companies have the ability and the means to change their investor base in ways that are consistent with their strategy. One of the most promising ways of attracting such investors is integrated reporting, which provides companies with a means of credibly communicating the commitment of its top leadership to diffusing integrated thinking across the organization and to building strong relationships with important external stakeholders. In the case of Shire, both a commitment to integrated thinking and the adoption of integrated reporting appear to have helped the company attract longer‐term investors, which in turn has strengthened management's confidence to carry out its strategy of stakeholder engagement and investment.     

Private Equity,the Rise of Unicorns,and the Reincarnation of Control‐based Accounting

This article discusses the rise of intangibles‐intensive companies and private equity (PE) since the late 1970s, and the role of both in bringing about the creation of a streamlined, more flexible set of accounting rules that, since their approval by the IASB and FASB in 2009, have been used by private companies and their investors. The PE industry comprises both venture capital (VC) firms that fund high‐growth enterprises and leveraged buyout (LBO) firms that fund more traditional, cash‐generating operations. Mainly because of the greater risks associated with both VC‐backed firms and LBOs—risks that make them ill‐suited for most public investors—such companies tend to require the more direct and active oversight provided by PE investors. And as the author goes on to argue, the more direct and active ownership of PE investors, as compared to the governance provided by most public‐company boards, suggests that financial accounting and reporting play a fundamentally different role in private than in public companies. Whereas the primary role of public‐company GAAP has increasingly (since the creation of the SEC in 1933) been to provide information for outside investors when valuing companies, the most important function of accounting reports in private companies is internal control—more specifically, ensuring that the interests of the managers of their portfolio companies are aligned with those of all the providers of capital. And recognizing this difference in the role of accounting, both the IASB and FASB responded to the requests of various parties (including private companies) by approving in 2009 the use by private companies of a streamlined and more flexible set of accounting standards. To the extent that the workings of PE markets continue to reduce the numbers of U.S. public companies, the author predicts that the resulting increase in the use of private‐company GAAP will continue to shift the primary role of accounting away from valuation and back toward its traditional roots in internal control and corporate governance.     

IPO or SBO?: The Increasing Importance of Operational Performance for Private Equity Exits Following the Global Financial Crisis of 2007–08

The authors report the findings of their recent study of the role of portfolio company operating performance in determining the choice of exit options by private equity firms between initial public offerings (IPOs) and secondary buyouts (SBOs), and how that role may have changed since the Global Financial Crisis of 2007–2008. Virtually all studies of PE exits in all countries have found that portfolio companies that exit through IPOs tend to be larger and have higher operating returns than companies that exit through SBOs or sales to other companies. After examining the exits of PE portfolio companies based in Denmark and Sweden during the period 2003–2013, the authors report that, although general market conditions continue to be a major factor, operating performance and size have become even more important requirements for IPO exits since the crisis. And thus PE firms that fail to make operating improvements in their portfolio companies are likely to find their exit options limited.     

Private Equity and Portfolio Companies: Lessons from the Global Financial Crisis

Critics of private equity have warned that the high leverage often used in PE‐backed companies could contribute to the fragility of the financial system during economic crises. The proliferation of poorly structured transactions during booms could increase the vulnerability of the economy to downturns. The alternative hypothesis is that PE, with its operating capabilities, expertise in financial restructuring, and massive capital raised but not invested (“dry powder”), could increase the resilience of PE‐backed companies. In their study of PE‐backed buyouts in the U.K.—which requires and thereby makes accessible more information about private companies than, say, in the U.S.—the authors report finding that, during the 2008 global financial crisis, PE‐backed companies decreased their overall investments significantly less than comparable, non‐PE firms. Moreover, such PE‐backed firms also experienced greater equity and debt inflows, higher asset growth, and increased market share. These effects were especially notable among smaller, riskier PE‐backed firms with less access to capital, and also for those firms backed by PE firms with more dry powder at the crisis onset. In a survey of the partners and staff of some 750 PE firms, the authors also present compelling evidence that PEs firms play active financial and operating roles in preserving or restoring the profitability and value of their portfolio companies.     

Value Creation by Active Investors (and Its Potential for Addressing Social Problems)

A distinguished Columbia academic discusses the methods and outcomes of “active investing” with the co‐founder of a leading private equity firm and a former senior partner of a well‐known hedge fund. In the case studies used by both panelists to illustrate their investment selection and management processes, the investors provided not only capital, but oversight and expertise that helped bring about significant increases in the productivity and value of their portfolio companies. What's more, in both cases, the changes that contributed to high returns for investors also ended up having major benefits for the companies' non‐investor stakeholders, especially their consumers. In the first of the two cases, Paul Hilal explains the thinking behind Pershing Square's $1.1 billion purchase of 14% of the Canadian Pacific Railway in 2012. With the help of intensive “fundamental” analysis of the company, Hilal recognized that Canadian Pacific was substantially underperforming its rival, the Canadian National Railway, in a number of important ways. And when CP's management and board rejected his plan for changes, Hilal led a proxy battle that ended in a landslide victory for the proposed slate of directors, including Hilal himself. Then, after bringing in a new CEO, the restructured board presided over operating changes that, during Pershing's four‐year ownership, increased the market value of CP from $8 billion to $30 billion. By 2016, when Pershing sold its investment (for $4 billion), Canadian Pacific was “shipping 20% more freight … 40% faster than ever before, with record on‐time performance, 40% fewer locomotives, 35% fewer people, and 14% improved fuel efficiency—all while maintaining an industry‐leading safety record.” In the second case, Russ Carson describes the success of Welsh, Carson, Anderson, and Stowe in turning its purchase in 1998 of a single oncology practice in Denver into a publicly traded company with more than 90 outpatient cancer centers throughout the U.S. When it was sold in 2011, US Oncology was producing $4 billion in revenue while employing 1,000 oncologists, who, as significant equity owners, shared in the success of Welsh Carson. Using modern management techniques to create “enormous efficiencies out of an extraordinarily fragmented system,” Carson and his colleagues created “the single largest—and, by all accounts, most reputable—outpatient provider of cancer services in the country.” One of the keys to this success was “getting the doctors to spend their time seeing patients, not looking for records,” which contributed greatly to Welsh Carson's ability to improve “both the quantity and quality of cancer care in the 90 communities that we were operating in.”     

Momentum and Foreign Investors: Evidence from the Korean Stock Market

Abstract:

We examine whether the price impact of foreign investors on the Korean stock market from December 2000 to February 2007 generated a momentum phenomenon. In our empirical results, foreigners seem to have exerted a significantly positive impact on prices in “up” markets (periods of positive stock returns), but have had little impact on prices in “down” markets (periods of negative returns). We document that the impact of foreigners’ trades is concentrated in large companies. Most importantly, when the market is in the up state, the returns of stocks of large companies that were positively affected by foreign investors in the previous six-month period continue to increase in the subsequent six-month period. As a result, the subsequent six-month return on a past “winner” stock portfolio is significantly higher than that on a past “loser” stock portfolio. This brings to mind a momentum phenomenon that has been reported not to exist in the Korean stock market.     

Private Equity: Accomplishments and Challenges

The authors provide an overview of the main accomplishments of private equity since the emergence of leveraged buyouts in the 1980s, and of the challenges now facing the industry—challenges that have been encountered before during three major growth waves and two full boom‐and‐bust cycles. In so doing, the authors review a large and growing body of academic studies responding to questions like these:

• (1) How have PE buyout companies performed relative to their public counterparts? And to the extent there have been improvements in operating performance and productivity gains, how have such gains been achieved? What role have PE firms played in this process?
• (2) Especially in light of the large fees and profit shares paid to the PE firms, or GPs, and the significant “control” premiums over market paid to the selling companies, how have the returns to the LPs that provide the bulk of the funding for PE funds compared to the returns earned by the shareholders of comparable public companies?
• (3) Apart from the high fees earned by its GPs, why is PE so controversial? Beyond their effects on productivity and benefits for investors, what are the employment and other social effects of buyouts and PE?
• (4) What are the prospects for future PE returns to their LPs, especially in light of the volume of capital commitments and high purchase multiples that were being paid, at least until the onset of the COVID pandemic? And what role, if any, should PE activity be expected to play in the recovery from the pandemic?