The past year has brought a degree of challenge to private equity that surpasses industry events that have confronted the very best fund and portfolio operators over the last several decades.

The spreads between winning and losing decisions have increased dramatically and the variance across verticals and industries are both volatile and more difficult to predict than before. “The battle for capital against a backdrop of unprecedented levels of new liquidity, fiscal policy, geopolitical headwinds and global health risks has created a paradox of the need for greater returns on capital in a context where the certainty of those returns is increasingly difficult to predict,” said Eric Frickel, managing director for executive recruitment firm BrainWorks. “Inexpensive debt exacerbates the edges of this polarity, increasing the temptation to consider leverage to push multiples and yields towards and perhaps even beyond historically typical risk tolerances.”

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