In 2002 its endowment had 2.3% allocated to private equity. Look no further than The University of Pennsylvania.

In some cases, the increase is even more pronounced. As an example, Brown University’s endowment had less than 20% in private equity in 2009. In fact, the Economist reported last week that the amount of money invested in or committed to private equity has “swelled from $1.3 trillion in 2009 to $4.6 trillion today” and that many allocators have more than doubled their allocations to private equity during this time. A lot has changed since then, mainly because investors have increased their allocations to private markets, materially in some cases. The trouble is, something has happened over the past two decades that has made it more difficult to plant seeds.įifteen to twenty years ago, the vast majority of portfolios were largely invested in public stocks and bonds. Ironically though, as hard as it is to believe in the moment, these are precisely the times that provide the fertile topsoil for future portfolio returns. Endless opportunities filled with sky high potential become toxic. People once viewed as oracles and geniuses morph into scapegoats and know-nothings. It happened to the Soviet Union with the fall of the Berlin Wall in the late 1980’s, real estate developers in the early 1990’s, dot.com companies in the late 1990’s, banks and homeowners in the late 2000’s, energy companies in the mid 2010’s, and many investors over the past year, especially those focused on high growth tech, crypto, and ESG.ĭuring these moments, confidence and clarity evaporates and is replaced by pessimism and doubt. The trouble is that when things do eventually break, they tend to break more suddenly and quickly than anyone had imagined. theirs, the Federal Reserve is almost always late to “pull the punchbowl away” during an economic expansion, and why so many investors rarely de-risk in the later stages of a bull market. It’s why governments don’t reform until it’s too late, real estate developers believe there is always room for one more building…. As a result, people tend to push the throttle until it does. The answer is actually quite simple - no one knows when something will break.

If so, why do people so rarely act before a crisis occurs? Why do we instead choose to bury our heads in the sand and hope for the best? You may or may not agree with Romney’s causes for concern, but for the moment let’s assume that at least a few have merit. With economic growth, the debt will take care of itself. Romney believes it is due to our “powerful impulse to believe what we hope to be the case - We don’t need to cut back on watering, because the drought is just part of a cycle that will reverse. Interestingly though, Romney argues that the most significant threat is actually not the events themselves, but rather Americans’ refusal to address them. The piece highlights numerous potentially “cataclysmic events” facing the nation, namely droughts out west, inflation, rising debt levels, profligate government spending, melting ice caps, illegal immigration, and the events of January 6th. Two weeks ago, Mitt Romney wrote an opinion piece in The Atlantic titled, “ America Is in Denial”.

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