Finding ports in a private equity storm

Top is most vulnerable to contagion risk

Exuberance always outweighs pessimism at the top of a private equity bull market. No one expects a down round, paper returns are strong, and deal flow flourishes.

In every cycle, investors will convince themselves the good times will never end; a 'this time it is different' mantra takes hold. This period of the cycle is always most vulnerable to external or contagion risk. There is always a tipping point that will bring overheated valuations back to Earth. After decades of ultra-fertile conditions for private equity and venture capital, the era of easy money and high returns is over. The driver this time is run-away inflation fuelled by war, pandemic, and monetary easing of an unprecedented scale.  Scottish Mortgage addresses private equity ...