One of the reason for watching the Milken Institute You Tube video is what do the long established big players in Private Equity think? In this segment 4 major funds were represented David Rubenstein from Caryle, Robert Smith from Vista Equity, Jonathon Nelson from Providence Equity and Leon Black from Apollo Global.

They were asked about biggest risk, keep in mind their funds are active on worldwide basis but based in the US.

1. potential recession – in the US there is a recession every 7 years the last one was in 2007.
2. fed gets it wrong when hiking interest rates. Everyone expects rates to go up but how much is the big question and when.
3. China growth is slower than expectations.
4. Commodity prices do not go up and stabilize
5. who is the next President – the street expects Clinton but it is democracy
6. digitalization of information – as we go into the connection of things – what is the cyber security of the company?
7. price to perfection – but a number of metrics most prices are high. It is harder to buy companies and make them more profitable.
8. stick to your model and have patience for the economy to cycle onwards
9. buying companies in fast growing industries should do better than the overall country’s GDP.

Having said all the above all agreed the Alternative Asset class has huge opportunities going forward and investors expectations are changing. A number of years ago people were expecting a IRR (internal rate of return) of at least 25% now they are expecting 15% and some of the sovereign funds have expectations of investments for 20 years. The traditional cycle is buy, maximize profitability and begin to exit the investment to go on to something else.

Senior leaders look at the risk-return ratio and the return of equity as they examine deals or potential deals for them and their firms.

Linking to dividend paying stocks, the world of private equity is for those with greater than $1 million to begin to invest, one day those with less money may find vehicles to invest in. Each of the leaders suggested while there is always many opportunities in the marketplace, sticking to what they know or there knitting has served them the best. Everyone knows something – either through their jobs, interests, contacts and that is where they should focus the bulk of their investing because you can easily track it. If you have patience, investing in long term dividend paying stocks is a good thing in any economic cycle.

There are more questions than answers, till the next time – to raising questions.