Does the private equity industry need to be reined in? A look at both sides of the coin

Though the private equity industry is attracting unfavourable attention following its strident growth over the past five years, the underlying cause is the hunt for yield following relentlessly low interest rates.

In 2018, private equity deals grew 10% in number and 18% in dollar deal value over 2017.

“The rising deal value in 2018 capped the strongest five-year stretch in history, while deal count reflected stiff competition and rising asset prices,” said Bain & Co.

The imminent rate cuts predicted by Wall Street will only exacerbate the yield chase.

Proposed demand in “Stop Wall Street Looting Act of 2019”

The fundamental plank of the Act is to “fundamentally reform the private equity industry and level the playing field by forcing private equity firms to take responsibility for the outcomes of companies they take over, empowering workers, and protecting investors.”

Expert views

• Bilge Yilmaz, Wharton Private Equity and Finance Professor and also Director of the Joshua J. Harris Alternative Investments Program: Carried interest taxation and service agreement fees are legitimate issues for discussion
• Steve Forbes, Editor-In-Chief: Hiking the tax on carried interest capital gains would discourage entrepreneurs
• Drew Maloney, president and CEO of the American Investment Council: [Concurred with Forbes]
• Lisa Donner, Executive Director of Americans for Financial Reform: The LBO model “desperately needs reform”