Big Trouble Brewing in Private Equity?

Jan-Henrik Förster of Bloomberg reports the clock is ticking for private equity to spend through tough times:

Time is ticking away for private equity firms to get ready for their next wave of deals.

Rising interest rates, inflation and recession risks have eroded consumer confidence and left buyout firms facing a new reality of higher financing costs and potentially lower returns. None of which changes the fact there’s more than $1 trillion sitting in their funds that needs to be spent. 

“People say there’s no financing available but then our clients are telling us ‘we have a big fund that we have to deploy,” said Umberto Giacometti, co-head of financial sponsors in Europe, the Middle East and Africa at Nomura Holdings Inc. “If you need to deploy, say, $10 billion in four years, and don’t do anything for sixth months, you are under pressure.”

The shift is profound for an asset class that for more than a decade was flooded with cash from investors hunting yield in a low-interest rate environment. Those same rates allowed firms to pile debt onto deals to amplify returns, while rising valuations offered exit routes at healthy premiums. So it went, even through the depths of the Covid-19 crisis

Things began to slow in early 2022 on creeping fears about inflation and rising rates — trends that accelerated after Russia invaded Ukraine. Private equity spending stands at roughly $30 billion in October, according to data compiled by Bloomberg — the lowest monthly outlay since early in the pandemic. Some investors have even asked firms to stop deploying capital while they seek to build cash buffers. 

Bankers and advisers to private equity firms expect activity to pick up in early 2023, likely in the form of smaller minority transactions and mid-sized buyouts. Depressed stock prices mean take-privates will be a very important source of dealflow, they say, as will secondary buyouts — whereby one fund sells an asset to another to bring in new investors.

“It’s really not that we’ve got nothing to do, on the contrary,” said Burc Hesse, a corporate private equity partner at law firm Latham & Watkins LLP in Germany. “There’s still lots of dry powder and many buyout firms have closed funds last year, so they will deploy.” 

Pressures in the traditional financing markets and higher costs to source alternative private debt mean there’ll be fewer heavily-leveraged mega buyouts. Firms including KKR & Co. are among those ready to write bigger equity checks to get things done, with the hope of refinancing when credit markets improve, or work with a company’s existing debt.

Last week, Thoma Bravo and Sunstone Partners agreed to buy US digital consumer insight company UserTesting Inc. for $1.3 billion. It was Thoma Bravo’s second all-equity deal in October, following its takeover of software company ForgeRock Inc. 

Listed buyout firms like EQT AB and Eurazeo SE, meanwhile, will be able to lean on balance sheets to help pay for deals in the absence of cheap debt.

“It’s the return to the all-equity finance LBO and holistic financing solutions,” said Klaus Hessberger, co-head of financial sponsors in EMEA at JPMorgan Chase & Co. “We’re seeing some signs of liquidity in credit markets improving. Until we see a recovery though, I expect more minority and non-change of control transactions.” 

Hot Spots

Target sectors in the new cycle will include infrastructure, health care and energy, according to bankers. These sorts of companies tend to find it easier to pass on higher costs to customers, making them attractive to private equity investors, they say.

“One specific deal category where I see a lot of interest is the combination of health care and software,” said Latham’s Hesse. “Funds love it because these businesses are scalable and have projectable recurring revenues in two growth sectors at the same time.”

While volatile markets have made investors more skittish and selective about the private equity firms they’re willing to give money to — leading to longer fundraising periods and downward adjustments on targets for some — firms with proven track records in the hottest sectors continue to secure commitments.

Nordic Capital, which likes investing in health care, has just hit its hard cap on a €9 billion ($9 billion) buyout fund. Apax Partners, which also targets health care, as well as tech, raised $10 billion in five months for the first close of its new flagship. 

The immediate challenge for those with money to burn is to allocate these funds at a time when it’s only getting harder to predict where rates and company earnings will go, and without the crutch of easy leverage to juice any returns. 

“The fact that buyers are becoming more price sensitive is not necessarily a bad thing,” said Hesse. “They are pretty good at finding businesses with sustainable strategies at any point in time.”

Tough times for private equity? If it's not a tough time deploying capital in a rough economic environment with higher financing costs and limited exit strategies, it's increased regulatory scrutiny.

Leah Nylen and Dawn Lim of Bloomberg report private equity probed by US on overlapping board seats:

Blackstone Inc., Apollo Global Management Inc. and KKR & Co. are among private equity firms that are facing a Justice Department investigation into whether they influence boards across corporate America in ways that violate antitrust laws, according to people familiar with the matter.

Federal investigators are examining whether private equity firms’ practice of placing executives on boards of companies in the same sector harms competition, said the people, who asked not to be named discussing a confidential inquiry.

Antitrust enforcers are concerned that board directors with seats on rivals in the same sector could influence those companies to act in ways that maximize gains for all -- instead of competing vigorously to provide the best services or lowest prices to consumers.

The Justice Department’s antitrust division has sent so-called civil investigative demands, which are similar to subpoenas, to Blackstone, Apollo and KKR on this matter, the people said. The firms are among a swath of large and small private equity companies that have been sent the letters in the past month, said the people.

The new inquiry is separate from routine antitrust reviews of deals that are before the agency.

Blackstone, KKR, Apollo and the Justice Department declined to comment. Receiving a civil investigative demand doesn’t imply wrongdoing.

It’s common for a dealmaker to sit on boards of multiple portfolio companies, especially if the person had a hand acquiring those businesses or has experience working in a sector. But many firms take pains to avoid having the same executives on boards of direct rivals, to avoid allegations that they could hurt competition and consumers.

The probe is part of an aggressive push by the Biden administration to rein in corporate consolidation and reinvigorate dormant antitrust powers. A 1914 merger law, the Clayton Act, forbids so-called interlocking directorates, where individuals or entities sit on the boards of companies that directly compete. But for decades, that law has been sporadically enforced.

The antitrust officials have been conferring with the research community on this issue over the past year, according to one of the people. The officials are especially scrutinizing how the practice affects rival health-care companies, the person said, although the inquiry looks broadly across many industries.

The best-known buyout firms grew quickly during the past decade of low interest rates as investors pursued higher yields. With abundant cash on hand and cheap debt available, many private equity firms extended their reach across the economy, investing in everything from health-care companies to biotech firms to consumer brands.

Many firms, while encouraging dealmakers to carve out a niche in a sector, have strict rules preventing them from pursuing companies in the same business. The directors usually are advised to recuse themselves from key votes if they also sit on boards of other companies in the same line of business.

Many buyout firms tell regulators and investors that they don’t micromanage companies and that board directors are simply there to be a check on company governance, not to influence day-to-day business or prices of goods.

The Justice Department launched its initiative aimed at eliminating board overlaps last week when it announced seven executives had stepped down from boards after the agency raised antitrust concerns. “Competitors sharing officers or directors further concentrates power and creates the opportunity to exchange competitively sensitive information and facilitate coordination -- all to the detriment of the economy and the American public,” said Assistant Attorney General for Antitrust Jonathan Kanter in announcing the action.

The enforcement push prompted three directors associated with Chicago private equity firm Thoma Bravo LLC to resign from the board of SolarWinds Corp., a network management software company. Thoma Bravo also has an investment in and sits on the board of Dynatrace Inc., which has a rival network management platform.

Thoma Bravo declined to respond to a request for comment. SolarWinds said in a securities filing that the executives chose to resign after receiving a letter from the Justice Department, rather than contesting the allegations, but didn’t admit any violations.

Both the Justice Department and the Federal Trade Commission, which also enforces antitrust laws, have called out the private equity industry for closer scrutiny. In public comments last week, FTC Chair Lina Khan said the agency would be “looking closely” at the role of private equity firms in the healthcare industry, where firms have assembled portfolios of providers. Khan cited research that private equity investments in nursing homes have led to higher mortality rates.

The law against interlocking directorates requires companies to eliminate the board overlap within one year. It also contains exceptions for small companies, those with less than $4 million in sales.

The law bars a “person” from serving on competing boards, but doesn’t clarify whether that refers to an individual or an entity, said Thomas Mueller of the law firm Wilmer Cutler Pickering Hale and Dorr LLP. It’s also vague on how to determine when companies compete against each other, he said.

“The courts haven’t decided those issues,” said Mueller. “There’s a good chance DOJ would press on those.”

A study published last week by Stanford University researchers found half of the more than 2,200 public biotech and pharmaceutical companies had overlapping board members with competitors sometime in the last 20 years. At any given time, roughly 10% to 20% of the companies researching new drugs and treatments had overlapping directors, said Ishan Kumar, a Ph.D. candidate in stem cell biology and one of the study’s authors.

The overlaps were most common among companies researching treatments related to cancer, vaccines, diseases that affect the nervous system like Alzheimer’s and Parkinson’s, and blood or kidney disorders, the study found.

“My guess is this is just the tip of the iceberg,” said Mark Lemley, another co-author and professor of antitrust and intellectual property at Stanford Law School. “We don’t have any reason to think it’s limited to life sciences companies.” 

It's probably not limited to life sciences companies but I agree with Dan Primack, private equity's antitrust future is much ado about nothing:

U.S. antitrust regulators may be coming for private equity.

Driving the news: Several large buyout firms have received Justice Department inquiry letters about partners sitting on multiple portfolio company board seats within the same industry, according to Bloomberg.

  • DOJ's concern reportedly is that this overlap "could influence those companies to act in ways that maximize gains for all — instead of competing vigorously to provide the best services or lowest prices to consumers."
  • Letters have gone out to private equity firms of all sizes, including industry giants like Apollo, Blackstone and KKR.

The big picture: Private equity typically views each of its portfolio companies as discrete entities, even if majority owned and held within a single fund. That's one of the reasons it's successfully fought charges of systemic risk.

  • This also is true of venture capital and growth equity, albeit usually with minority stakes.

Why it matters: Were overlapping board seats to violate U.S. antitrust law, then the same argument could apply to overlapping investments.

  • That would blow a huge hole in the core investment strategies of many industry-focused PE firms. Plus of more diversified firms with robust industry practices.
  • It also could drive up the price of private equity deals, because of added regulatory uncertainty.

The bottom line: Private equity has a long history of fending off Washington, D.C., as best evidenced by its continued ability to treat carried interest as capital gains.

That dynamic probably will play out again this time, although firms are surely doublechecking board meeting notes to make sure they didn't give DOJ an opening.

Another article which caught my attention was written by Nicholas Kusnets of Inside Climate News stating with fossil fuel companies facing pressure to reduce carbon emissions, private equity is buying up their aging oil, gas and coal assets:

When Continental Resources announced a deal last week to take the oil company private, it joined a trend that has swept across the fossil fuel sector in recent years. With investors agitating for energy companies to lower their greenhouse gas emissions, many oil and gas drillers and utilities have sold off wells and coal plants to private companies or private equity firms, which have been eager to scoop up the industry’s dirtier assets.

Now, some environmental advocates are warning that these transactions, supposedly driven by an effort to reduce emissions and climate risks, may instead do the opposite. 

Privately held companies are exempt from many of the financial reporting rules that publicly traded companies face, and they are more insulated from the social and environmental pressures that investors have placed on the fossil fuel sector in recent years. As the impacts of climate change have worsened and more governments have acted to reduce emissions, investors have increasingly pressed oil companies to prepare for a pivot away from fossil fuels by scaling back drilling plans and investing in alternatives like renewable energy or biofuels.

The concern is that these privately held companies, facing less external pressure, might continue to run coal plants and oil wells for longer than the publicly traded concerns would have. Advocates also warn that the shift into private hands could increase the risks that the public will be left with the bill for cleanup when the operations are eventually shut and abandoned.

In the case of Continental, a large independent oil producer with headquarters in Oklahoma City, the move to go private was driven explicitly by a desire to free itself from investor restraints.

“We will play an essential role for decades to come as we do our part to help secure America’s energy independence without any encumbrances,” the company’s founder and chairman, Harold Hamm, wrote in a letter to employees, explaining his proposed purchase of the company. (The letter was disclosed in a securities filing, which privately held companies generally are not required to submit.) “Let’s go find some oil.”

In other cases it has been private equity firms, which promise large returns for investors by buying companies and placing riskier bets than traditional investment firms that have been purchasing oil fields and coal plants across the country, often through holding companies.

In recent years, BP, ExxonMobil, Shell and ConocoPhillips have all sold assets to private equity firms or privately held energy companies, taking polluting wells off their books while shifting them to less transparent owners. Utilities have made similar sales of coal- and gas-fired power plants. All told, private equity firms have invested more than $1 trillion in the energy sector, including renewable energy, since 2010, according to the Private Equity Stakeholder Project, which works to help “communities, working families, and others impacted by private equity investments.”

The trend is driven in large part by the flight of traditional investors seeking to green their portfolios.

“Public investors like mutual funds, hedge funds, university endowments, pension funds — they are actively shifting away from fossil fuels,” said Pavel Molchanov, managing director of renewable energy and clean technology at Raymond James, a financial services firm. “As public investors are divesting fossil fuels, someone’s buying it. They’re not disappearing into thin air.”

To further complicate the picture, pension funds are in some cases divesting from fossil fuels in parts of their portfolios even as they continue to invest in others, if indirectly: Public pension funds have plowed money into private equity funds because of their high yields, and many of those private funds are using that money to buy fossil fuel assets.

All of this serves to decrease transparency about who owns what. And some environmentalists say it undermines the efforts of a growing movement backed by many large investors, including some public pension funds, to use their money to exert pressure on the fossil fuel industry.

Alyssa Giachino, campaign and research director with the Private Equity Stakeholder Project, said that big oil companies have been responding to investor pressure by selling off some of their dirtier and less profitable assets. But if those sales merely shift the properties to other companies, “it hasn’t solved anything,” she said. “Exxon can make claims that they’re reducing their carbon footprint, or however they want to quantify the progress that they’re making, and the impact on the planet is the same or worse.” 

Worse, potentially, because these new private owners, without the same pressure from investors, may pay less attention to methane leaks, flaring or other emissions associated with production.

According to data compiled by the Clean Air Task Force and Ceres, two climate-focused nonprofits, the most climate-polluting oil and gas drillers, relative to their size, are overwhelmingly privately owned.

There is no comprehensive data on private equity’s investments. But the Private Equity Stakeholder Project reported that, as of last year, about 80 percent of the energy companies owned by the 10 largest firms are in fossil fuels. Molchanov said that while private equity firms have more money invested in fossil fuels than in renewables, that is because fossil fuels still dominate the world’s energy supply. Private equity has been plowing more money in renewables in recent years, he noted.

Emily Schillinger, a spokesperson for the American Investment Council, which represents private equity firms, said in a statement: “Private equity is playing an important role in the energy transition and investing more each year in renewable energy projects,” with $21.5 billion invested last year, she said. “This transition will take time and will require serious investment and commitment. This significant investment is delivering more jobs and cleaner energy for the future.”

Still, there is little doubt that private financing is playing an increasing role in fossil fuel energy, too.

In September, for example, Exxon and Shell sold Aera Energy, a joint venture that is one of the largest oil producers in California, to the German asset management firm IKAV for $4 billion. In 2020, IKAV had also bought oil and gas wells in Colorado and New Mexico from BP.

That same year, the British oil giant was in the process of selling off its Alaska operations to Hilcorp Energy, which has grown to become one of the largest oil and gas producers in the country. Hilcorp, a privately held company, also has a partnership with the Carlyle Group, a private equity firm, that has been buying oil wells across the country.

The ownership can be hard to trace. Last year, ConocoPhillips sold wells in Wyoming to a company called Contango, which is a subsidiary of Crescent Energy. But Crescent Energy is managed by KKR, a large private equity firm.

The concern for environmentalists is that each of these transactions reduces transparency for the properties and means that less attention may be paid to the environmental impacts of their operations.

“Private equity, fundamentally, is in the risk-driven enterprise,” said Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, a research nonprofit based in Ohio that works to promote sustainable energy. “It likes risk, because risk is where you find your great returns.” 

“When a large enough share of the oil and gas system starts to become private,” he said, “then you start to amp up the kinds of risks that the industry can take, including climate risks.”

Brittany Berliner, a spokesperson for the Carlyle Group, said in a statement that her firm has chosen to invest in fossil fuel companies to promote “real emissions reductions within portfolio companies over the long term.”

IKAV did not respond to a request for comment, but in a statement that accompanied its purchase of the Exxon and Shell joint venture, it said it was committed to reducing emissions from oil and gas development and would achieve this by powering its operations with renewable energy. “In addition to our long-term goal and commitment to renewable energy, we recognize the continued need for oil and gas and for these assets to be operated safely and responsibly to facilitate a smooth and sustainable transformation of our energy supply,” Constantin von Wasserschleben, the company’s chairman, said in the statement.

According to the data compiled by the Clean Air Task Force and Ceres, which was gathered before IKAV’s most recent purchase, the company had the sixth-highest greenhouse gas emissions per barrel of oil among the country’s top 100 oil and gas producers.

Data on private equity is limited, but according to a recent report by the Private Equity Stakeholder Project and Americans for Financial Reform Education Fund, a coalition of advocacy groups, the 10 largest private equity firms oversaw at least $216 billion in energy assets as of October 2021. The largest energy investor was Brookfield Asset Management, a Canadian multinational based in Toronto with $107 billion invested in 40 fossil fuel companies and 35 renewable companies. Brookfield is also a majority owner in another investment firm, Oaktree Capital Management.

A spokesperson for Brookfield said the firm’s holdings in carbon-intensive companies are meant to help finance their transition to lowering emissions and that it is shifting its investments into renewable energy.

Seth Feaster, an energy analyst at the Institute for Energy Economics and Financial Analysis, said one of his biggest concerns with private equity’s move into the energy sector is how it is continuing to expose some public pension funds to the risks of investing in fossil fuels, even as those same funds are supposedly divesting from oil, gas and coal.

The New York State Common Retirement Fund, for example, is in the process of selling its stakes in fossil fuel companies that it determines are not prepared for a transition to clean energy. But the pension system has  10 percent of its money invested in private equity funds. Feaster and his colleagues tracked some of these private equity investments and found that the New York pension fund is a part-owner in a large Ohio coal plant that is one of the most polluting plants in the country.

“The state itself, and the legislature, is moving in a much greener direction and trying really hard to do this stuff,” Feaster said of New York. “Meanwhile, the state pension fund is supporting keeping coal plants alive in its neighboring state.”

A spokesperson for the common retirement fund declined to comment.

A major question is whether this increase in private ownership may slow a transition to cleaner energy by keeping coal plants or oil wells online when previous owners might have wound them down. Molchanov of Raymond James said this was a legitimate concern.

“Public funds are pressuring Big Oil and smaller companies to decarbonize, set net-zero targets, invest in renewables,” he said. “All of that pressure is real and it’s growing. Private equity is not as susceptible to that type of pressure.”

Privately held companies, which are often owned by individuals or families, raise some of the same concerns as private equity because they can withhold more information from financial regulators and are more insulated from investors. Hamm, the Continental chairman, alluded to this insulation in the letter to employees in which he said that oil exploration would remain central to the company’s future.

Continental did not reply to requests for comment.

All these private deals suggest that even if large public investment funds and large public oil companies grow increasingly wary of spending money on new oil and gas exploration, there may be others willing to step in as long as oil and gas demand remains strong.

In March 2021, after oil prices had returned about to where they were before Covid-19 locked down the globe, Bob Maguire, managing director and co-head of Carlyle International Energy Partners, part of the Carlyle Group, took part in an energy-sector webinar in which he declared that oil demand would remain steady or even grow for the next 15 years.

“We ask ourselves, who’s going to own that stuff,” Maguire said. Public markets appeared to be largely uninterested, he said then, leaving an opening for firms like his. “By default, private equity is kind of the only game in town. And that does suggest there are buying opportunities.”

Alright, let me begin with that last article because it reinforces the point many Canadian pension fund CEOs and CIOs have stated publicly, namely, they don't believe in divesting out of oil & gas because it merely passes off the risk on to a fund that doesn't care about ESG.

Having said that, private equity firms aren't stupid, they know where the puck is heading and it's not in oil and gas. 

Brookfield Asset Management is huge in financing the transition economy. They raised $15 billion for their inaugural Global Transition Fund which had three major Canadian pension funds as anchor investors (IMCO, OTPP and PSP Investments).

Brookfield, in my opinion, is a world leader in the transition economy and is now rightly promoting nuclear energy as part of the future to decarbonize economies:

Let me put it to you this way, I understand environmentalists' concerns about private equity investing in fossil fuels but it's not always a bad thing. 

In fact, the largest private equity firms are engaging with other investors to bring more transparency to the industry, especially in regard to data on the heaviest GHG emitters in their portfolio.

This is what the ESG data convergence project is all about, LPs and GPs unified to bring more transparency on ESG metrics in the private equity world. 

I wrote about it last week with OPTrust's Managing Director of Sustainable Investing and Innovation, Alison Loat, when I went over their enhanced climate change strategy.

So, just because you hear "private equity" don't assume they're all environmental barbarians at the gate. 

Many private equity firms are taking the lead on ESG issues, showing publicly listed companies how it's done right. 

As far as the financial and economic environment  getting tougher on PE firms, no doubt about it.

A month ago, I discussed how OMERS plans to triple its Asian assets within eight years and went over a panel discussion featuring OMERS CEO Blake Hutcheson and Jim Pittman, Executive Vice President and Global Head, Private Equity at BCI.

Blake and Jim had this to say:

Jim Pittman

I spent most of my time in private markets. The viewpoint we have in Private Equity is we've been able to get 20-30% returns over the past 5 years. And you don't get that with low risk, you get that with high risk, a lot of leverage. And so one of the issues we have to look at today, especially when we look at our own teams, oftentimes our team expects that if we got 25% returns in the past, we should be able to get that in the future. That's unlikely to happen. We have to retrain our people, in terms of equities, in an environment where you no longer have quantitative easing, you have quantitative tightening and rising rates, there has to be an impact on exit values and there is also an impact on entry values. Therefore you have to learn how to invest in a new environment and that is an expertise that many of us have to learn.
He added:

But one of the things we didn't talk about so far in the panel, and you have to look at from a patient capital perspective, as a pension fund over the past 15 years because of all this QE, we've had an amazing ability to be over-funded. Most of our pensions which we represent are at 105% or 110% in terms of funding, so we can take more of a shock in terms of volatility in terms of what is going on in underlying markets and not have to respond. I think other pensions which are underfunded and less liquid will be much more impacted

This is a great point, Canada's large pensions are in a great funding position to withstand any shock and over the last few years, they have been lowering their discount rate and building up their reserves for a rainy day. 

Blake then discussed OMERS' direct drive capabilities:

Blake Hutcheson:

Just speaking for us, we've largely been direct drive investors for a long time. When you go to business school what is the first thing they teach you? What am I good at, how do I get in front of trend given limited resources? We have spent the last decade trying to get really great at infrastructure. We have 22% of our book in it. We have 30 world-class assets, the largest nuclear plant in the world in Canada, we've invested in toll roads in India, we've invested n Bangolore Airport, we own the Port of Melbourne with others,Transgrid here. Today, our Oxford Properties platform which we own 100% has about C$75 billion assets under management, I would put it up against the best of the world. We just agreed to do a mixed-use project in Sydney which is over C$1 billion of our capital, etc. And our private equity is largely direct drive. Now, given limited resources, we will support fund type structures where we can't be great. For example, we have backed some significant investors in this market in private equity because we aren't able to compete with the best of the best in this part of the world at this point. And the fees are what they are.

[Talks about how Australian regulators are hampering pensions]

... We just try to do the right thing, deploy our own capital, if we can't be world-class, we will partner with others, and so far so good, we have been outperforming for decades on a relative basis and usually on an absolute basis, often on a relative basis and that's just our strategy.

The discussion then moved to private markets and whether they can still deliver great returns. 

Encik Ahmad Zulqarnain discussed getting access to top managers and access to co-investments to reduce fee drag. 

Jim Pittman said the "debt markets are frozen" and that is impacting private markets:"Right now, it's a freeze, nobody knows how to actually get distributions, how do you sell something to give back to LPs so you raise more money."

He added: "There is an amazing pause we are seeing over the past 2 months and maybe over next 4 months. We were very slow to get into venture capital and growth ... now we are actually waiting to participate. I think times are getting very interesting and someone who was under-allocated will see more opportunities."

Jim Pittman is running one of the best private equity portfolios in the world at BCI and he knows what's going on in PE. 

It's tough out there, no doubt about it, but the best funds will be able to thrive in the toughest environment (with some help from sovereign wealth funds and PSP Investments).

Still, you can forget about funds delivering 20%++ returns in this environment, that's simply a pipe dream.

Also, some of the biggest private equity firms aren't focused on PE right now, they're focused on infrastructure opportunities in Asia:

All this to say, the landscape for PE is changing but in my opinion, it's changing for the better.

Below, take the time to once again watch OMERS CEO Blake Hutcheson and Jim Pittman, Executive Vice President and Global Head, Private Equity at BCI discuss the long and short of patient capital at the Milken Institute's Asia summit (fast forward to minute 27 to hear Jim's comments on the amazing pause they're seeing in PE).

Also, Natalie Adomait of Brookfield Asset Management explains why the company "are big fans" of nuclear energy.

I'm a huge fan of nuclear energy too and think there are tremendous opportunities here for Canada's large pension funds to invest either through Brookfield or go it alone (Canada's nuclear energy industry is still quite insular and needs to open up to the finance people, hopefully Brookfield will change this attitude).

Lastly, Philipp Freise, Co-Head of European Private Equity at KKR, recently appeared on Bloomberg Surveillance stating Europe has never been more attractive (starts interview at minute 10). 

Mr. Freise has been preparing for a world without leverage:

“Leverage is our enemy in a crisis like this,” Philipp Freise, the firm’s co-head of European private equity, said in an interview. “The source of returns is growth. When we buy a company, we try to build something that didn’t exist before.”

He's spot on, in this environment, leverage is your enemy.