Letter from the Editors
At the end of 2020, many regarded the extraordinary resiliency shown by both the economy in general and private equity in particular and wondered if the momentum would last. As we pass the midpoint of 2021, the answer so far has been clearly in the affirmative. To be sure, the recovery is uneven across sectors, the COVID-19 threat is far from extinguished, and there may well be a cooling of the economy on the horizon as we witnessed by the volatility in the stock market this past week. But broadly speaking, fundraising, M&A and the secondaries market are all strong.
Indeed, the greatest source of uncertainty for private equity today comes not from market conditions but from the regulatory changes being discussed or enacted in Washington, Westminster and Brussels. The Biden administration has revived the debate on the tax treatment of carried interest, encouraged a tougher line on non-competes, strengthened CFIUS’ enforcement capabilities and is promising heightened antitrust scrutiny. In the UK, a public consultation on the tax treatment of asset holding companies is underway. In Europe, the Sustainable Financial Disclosure Regulation has been enacted, and the Mandatory Human Rights Due Diligence law is moving through the pipeline. Staying ahead of this level of regulatory flux will require both stamina and agility for private equity firms.
We hope that you find this edition of the Private Equity Report Mid-Year Review and Outlook to be a useful summary of the current state of the market and of the notable developments in the regulatory landscape.