Think positive

The liquidity troubles which dominated the latter half of 2007 had looked set to spill over into 2008. However, a destabilisation of the private equity industry in 2008 does not feel imminent. Private equity is cyclical and its investments are often much longer term than retail investors and hedge funds. This current phase is in many people's view just a bump in the road and a healthy correction, rather than a sign of a permanent downturn in the industry's fortunes. In fact, strategic debt structuring means that private equity is better prepared than in previous times of cyclical difficulties. The fact remains that private equity has a large amount of capital still to invest. In the US for example, private equity funds raised a record $302bn in 2007, a 20% increase on 2006.