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The private equity industry in the new interest rate environment

February 24, 2022

As interest rates shift from a decades-long decline to hovering at the zero lower bound and potentially increasing significantly, the private equity industry will face new pressures. The inflow of capital to the asset class will decelerate, leading to an increased scrutiny of costs and an opportunity to shift bargaining power to limited partners. The first LTI Report argues that while the private equity industry has made promising steps towards innovation to preserve momentum, the adverse macroeconomic pressures will likely still prevail, affecting the industry’s growth and, subsequently, its cost structure, which remains a controversial subject. 

Private equity is a unique form of long-term capital that plays a significant economic role. As such, it is

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When the Tailwind Stops: The Private Equity Industry in the New Interest Rate Environment

February 24, 2022

This first report in a new series from the Long-Term Investors think tank at the University of Torino and CEPR expands on the dynamics at play that shape the development of the global private equity industry and its interaction with the interest rate environment and explores the consequences of deceleration in its growth.

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The consistent growth of long-term alternative asset managers in the past four decades coincided with the secular decline in interest rates. This has been an important tailwind for the private equity industry’s development as debt markets became increasingly cheaper, and institutional investors were searching for ways to offset the shrinking yields on their fixed income

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