10Pirsgirêk
Private markets now own a large part of the real economy.
Private equity and private infrastructure funds own companies that run hospitals, care homes, software platforms, logistics networks, utilities and manufacturing plants. Their resilience matters to employees, customers and communities, not only to investors.
The private equity model concentrates ownership, uses debt to finance acquisitions and focuses on operational improvement over a defined holding period, typically followed by sale. These features can strengthen companies through active governance and professional management. They can also reduce buffers: higher leverage means less room to absorb a shock, efficiency programmes can remove spare capacity, and the need to exit within a fund’s life shapes investment horizons.
Several systemic questions follow. Many portfolio companies rely on floating-rate debt, so interest rate changes pass quickly into cash flow. Valuations of unlisted assets are estimated rather than observed, so losses can be recognised late. Some essential services are owned through layers of holding companies and lenders that are hard for the public to see. Physical and technological shocks reach these companies like any other, but the way they are financed affects how the shock is absorbed and who bears it.
Stress can travel outward: from operating companies to the private credit funds and banks that lend to them, to the pension funds and insurers that invest in funds, and to the employees, suppliers and service users who depend on the companies. Understanding these channels at sector level is a shared industry interest.