A (0:00)

Well, good evening and.

B (0:04)

Welcome.

A (0:04)

I'm Howard Davis, director of the school. Welcome to all of you. Many people will be here for the first time since this is the first day of term. And also, as you see on our just in time theory of rebuilding, we've only just got the entrance hall available for people to come through the event. This evening is a celebration and a launch because we are celebrating a very generous gift to the school and launching a new program on private equity. And I'm delighted that Arif Naqvi, who is the founder of Abraaj Capital, based in Dubai, is with us. And Arif has kindly organised this donation from Abraaj to set up the program in the school. Arif is an alumnus of the lse. His wife is an alumnus of the lse. His son, if he passes his exams this year, will be an alumnus of the lse. And Abraja's success has been built largely on employing alumni and of the lse. So this is, in a sense, just a dividend we're getting back here rather than a pure piece of philanthropy. But, Arif, we're very grateful to you and I hope you can all show your appreciation for this. Thanks a lot. And what this has allowed us to do is to appoint Ulf Axelson, who will speak to you in a moment as the Abraaj reader in private equity. It's also allowed us to organize and launch a new Masters in Finance and Private equity and will allow us to fund a research program in private equity. And I think that is a particularly interesting area. It's a rather controversial area and I'm sure Ulf will say something about that. But there was a recent report which disputed a lot of the claims that private equity had made for its wealth creation, et cetera, and had argued that it's all to do with their fancy financial engineering and kicking people out of work. And this is a lively area of controversy in public debate. And I think it's important that, that the LSE is engaged in this and it is, of course, an increasingly important part of the capital markets. So I'm thrilled that this pushes us into an area which I think is a very important one to understand. So what we have this evening is Ulf is going to talk to us about what we know from an academic perspective on private equity so far, and I hope he'll say something about what we don't know and what we're going to be working on. And then after that, there'll be a panel from the department which will be chaired by Felder Hardiman. Ulf will introduce him and the panel later. So welcome to the school this evening and I'm going to hand straight over now to Ulf. Thanks.

B (3:36)

Thank you very much, Howard. And thank you again to Arif and Abrash for making this possible. And thank you to the LSC for putting me in charge of this exciting new initiative in private equity. So what I want to do today is talk about the most controversial part of private equity. So I just want to stress to begin with that private equity is wider than just leveraged buyouts. But I'm going to talk about buyouts because that's where I've done the most of my work and that's where the most controversy basically is. But private equity is also angel investing, venture capital, mezzanine investing and all those other parts. And that's big, important parts that we also want to do research in and teach in at the lse. But I want to talk about buyouts. And what I basically want to do is in 30 minutes, get you up to speed to where we really stand, all the knowledge that's been created in academia over the last 30 years about private equity. So you better hold on to your seats. So what I'm going to do is this is a road plan. I'm going to talk about just what I define as private equity, and this is going to be buyouts, basically how it works, why it's controversial, so the arguments against private equity and then why we think private equity actually could be a good idea for society as a whole. And then I'm going to give the latest empirical evidence about whether we think private equity creates value in the world or destroys value. And finally I'm going to talk about maybe the most controversial side of buyouts, which is the big amount of leverage that they use and whether we think that's good or bad, is it too much debt? So without further ado, let me do that and just get us started. I just want to put up a graph that basically shows the history of private equity. This is US fundraising data. US is where this activity started. So what I have on this graph is the contributions made in a year into private equity funds as a proportion of the total stock market capitalization of the US Stock market. So I want to make a few points here. So one thing is you can see this enormous mountain at the end. That's the huge run up we had in private equity activity from 04 to 07 in the credit boom and then the huge kind of collapse in the credit crisis. So this kind of Points to the question, do we think it was just a blip and private equity will now die out, or do we think it's a sustainable business model? Another point to make about that is actually that if you look at the last dot there, the numbers in terms of how much money is still going into this asset class are as a proportion of the stock market is actually higher in 2009 than it was in the last big boom, top of the last big boom in the 80s. So it's not really dead. And I think the 2010 numbers are about similar. A third point I want to make is that even though this is a cyclical industry, if you kind of ignore that big mountain at the end, it's actually a remarkably stable activity once you normalize by the stock market capitalization. So, you know, it's ups and downs, but hovering around half a percent of the total US Stock market capitalization in the US in terms of how much money goes into this asset class. So what is private equity? What do I define as private equity? I think the fellow that Howard was referring to that wrote this report that was very critical, I think it's called leverage, private equity, public loss. He defined buyouts as the activity of using other people's money to buy companies, using a lot of debt. And that's basically what it is. But I want to give a bit more detail on how this activity works. So how does it work? You start off as a general partner, which is the people who actually run this activity, people like Arif at Abrash or Kurt at Pamira that we'll hear from later. They go out and they raise a fund of money from institutions and rich individuals from say 100 million to up to $20 billion is about the largest of these funds. This is what we call blind money, in the sense that the investors that give this money actually don't know what it's going to be used for. So you give a carte blanche to go out and invest in whatever you see fit. So you have all this money, then you go out as a general partner and try to find companies to buy. So it could be listed companies that you then take private or private companies. You buy these using partly your fund capital that you've raised. And usually that constitutes about 30% of the purchase price. That's the equity that goes into these deals. And the rest is debt. So around 70% on an average is debt that you raise from the debt markets at the point when you buy these firms. That's why it's called levered buyouts Another thing to notice is that the limited partners, the people who gave the money into these funds, they don't really have a say here. They have no veto rights in terms of what investments are going to be made. But there is a time limit in which you have to make these investments. And the fund only has on an average a 10 year life. So you have to be done within 10 years. Then you have to exit all your investments, either by liquidating them or selling them through an initial public offering or to another industrial firm, or in what's called a secondary transaction to another buyout fund. And the idea is that the pile of money then has grown tremendously. And how do we split this pile of money? So this is the typical model of how money is split between the investors and the general partners. It's called the 220 rule. There's typically a 2% management fee that investors pay to the general partners for running this fund, 2% of the invested capital. And then the general partners also get typically 20% of all the profits that you generate from these investments, while the limited partners get the rest. So you can get pretty rich in this activity as a general partner if things go well. So that's how it's run. Now, why is this a controversial activity? What is the argument against this activity? And here I'm going to use words from an ex Danish prime minister who I think is probably not the most popular guy in the private equity community. He's also now the chairman of the European Socialist Party. And most importantly, he's kind of the man behind the first drafting of the dreaded new European regulation of hedge funds and private equity that is still being kind of hammered out and that everyone in the industry is pretty upset about. But basically he's asking some relevant questions about this asset class. And his arguments against buyouts, not private equity, including venture capital, and those activities, but buyouts in particular are the following. So firstly, he says this is just an activity that has too much debt in it, too much leverage. These general partners just try to make a lot of returns by levering up these deals. But that hurts companies because they can go bankrupt. It hurts employees because if the firms go bankrupt, then all the employees will lose their jobs. It hurts the economy because this could be destabilizing and basically contribute to systemic risk in the economy. So too much leverage. They also don't run the firms very well. They asset, strip them and destroy them in the search for profits. So basically, buyout guys go out, buy a firm, strip it of its most valuable assets, fires all the workers to just make profits. And they don't invest in the long term because they're only interested in short term gains. So that's the final point, that because private equity owners only hold these firms for a limited time period, they're not going to focus on the long term. So they're just basically going to do the short term stuff and not do research and development and other long term investments. So those are the concerns about private equity. So what are the argument? And by the way, I should actually advertise here that I've managed to convince Mr. Rasmussen to come to the LLC on January 12th. So I hope you will all come and listen then it's at the same time and maybe we'll put some private equity guy up to fight with him. I don't know yet. But anyway, he's coming. So what are the arguments for buyouts? I think they have been vocalized most kind of eloquently by the financial economist Michael Jensen at Harvard and most in his famous paper from 1989 called the Eclipse of the Public Corporation, where he basically declared the leveraged buyouts to be the greatest organizational innovation of the 20th century. And he also declared that he thought leveraged buyout as an organizational form would just completely take over and public firms would no longer exist. By the way, this was in 89. One year later the buyout market had died. So it was not such a good prophecy. But we still have the market around now, so maybe one day we'll get there anyway. So what is the argument for why private equity could create value in the world and be a good thing? So basically the argument is the following. If we step back and think about what the biggest question we have in financial economics really is, and maybe in economics in general, it's really how do we get resources transferred from people who happen to sit on them to the people who can use them in the most productive way? That's how we create wealth in society. This is problematic mainly because of two problems we have in the world. One is information problems. When we do give money to someone to run a firm, we don't know whether the guy is a loser or not. So that's a problem in handing over your money. The second problem is what we call moral hazard in economics. The fact that if you do give money to a guy to run a firm, even if he's good at running a firm, maybe he'll just run away to Bahamas with the money or be lazy and not do anything. So it's important when we Try to allocate resources to the most productive use, that the people who allocate these resources have good information and can monitor the CEOs that run these firms. So this is done in different ways outside of private equity. So, for example, in public firms, how is this done in public firms? We typically have owners that have a very small stake in the company. So we have small shareholders. That's problematic. It's good for risk sharing because they don't put all their eggs in one basket. But it's problematic in the sense that these small guys don't really have either the means or the incentive to basically check whether the firm is doing what it should be doing. So we could very well have a CEO that does whatever he wants to. We do have boards representing the shareholders in public firms, but they are often weak and captive in the hands of the CEO. So there are problems with public firms. Another solution could be to just say, let's just take the people that have the money and let them run the firms directly, because then we don't have the moral hazard problems. This is how family firms are run. But the problem with that is that the people who do have the money may actually not be the best people to run a firm in the first place. And secondly, having all your money invested in a family firm is really not very good for risk sharing. You really have all your eggs in. In one basket. So that's not such a great solution either. So here is where private equity can come in as a good way to solve this financial intermediation problem. And how does that work? Well, basically the idea is that by setting up this private equity fund that is going to go out and take majority positions in firms by people who are really good at overseeing firms, we're going to have then both have the incentive and the capability to really monitor these firms and help these firms in different ways. And that's what private equity organizations do. They are very actively involved with the companies that they run. They sit on the boards. The boards are typically small, meet quite often are quite active. They also help importing good management practices to companies. So this helps the companies do the right thing. It's also the case that the leverage that is being used in private equity serves a positive role here in the sense that firstly, it can kind of leverage the expertise of these general partners because by using debt, they can take a majority position in ownership position in more firms, so their expertise can be levered across more firms. Secondly, and this is an idea that Michael Jensen also had, putting a lot of debt onto a company actually could make the CEO of that company work much harder than otherwise because there's going to be this sense of urgency that you have to try to pay off the debt, and that's going to make you work hard. So this is the idea, you can see that if the general partners really do this activity, that helps in terms of running the firms in the right way. The question is just, have we just pushed the problem back an extra step? Because it's still the general partners are not the ones that own the money that comes from their investors. So maybe we just pushed back these information and monitoring problems back to the conflict between general partners and their investors, the limited partners. So who actually monitors the monitor in this activity? How does private equity solve that? Well, here is where the structure of the private equity fund comes in and I think one reason why Michael Jensen called it the greatest innovation in the 20th century. And this is something that I actually have studied in a paper in the Journal of Finance together with my colleagues Per Stromberg and Mike Weisbeck, showing why the way this financial structure of the fund is set up, why that actually aligns the interest of the limited partners and the general partners in this fund. So, so what's the idea? Well, firstly, the carry that is given or the profit sharing that is given to the general partners gives the general partners a big stake in kind of the fortune of these firms. So that makes them have the incentive to monitor and pick the right investments. Now, you could imagine doing that on a deal by deal basis, have this profit sharing arrangement. That would probably be a very bad idea because if you remember how the payoffs to this general partners look, they get part of the upside. They don't take all the downside. That's something that the limited partners take. So if you did it on a deal by deal basis, these general partners would have an incentive to just go up and buy everything that they can buy and hope that most of them pay off the ones that don't. They don't care because they don't really have a stake in it at all. So this is why pooling everything into one fund and then splitting this profit sharing over the whole pool makes sense because now if you do do a very bad deal in one of your fund investments, that's going to eat up your profit from another good deal that you've made. So this is going to create some internal discipline for the general partners to do the right thing. So there's some internal discipline. There's also some external discipline provided by the fact that as a general partner, when you do want to go out and buy a big firm, you have to actually go out and raise a lot of debt to do it because you don't have enough money to do it. Otherwise you have to access the capital markets every time you want to do a deal and that gives an extra external check. Because if the banks are doing their job, I'm not saying that they're always doing their job, but if they're doing their job, they wouldn't want to give all this debt to a deal, which they think doesn't make sense. So this creates an extra check with the banks or the debt providers as gatekeepers. So that's one way to align the interest between the general partners and the limited partners. Another important part of the private equity model is this what I call the ownership term limit. Like we have term limits on precedents, but we don't have it on CEOs. But private equity owners actually do have a term limit. They have this 10 year horizon. And that can be a very powerful incentive mechanism because it forces, it kind of gives you a sense of urgency to get things done within this horizon. It's also the case that when you are done with this fund and you want to go out and raise your next fund, if you didn't do well in the first fund, then you're not going to get any money again. So this term limit kind of gives an extra check, an incentive to do, to do well. So these are kind of the way of structuring this whole activity then really looks like it can help us allocate resources from people who have them to the most productive uses. So that's the argument for why we like private equity and think it might help the world. So what I want to go to now is to say we have arguments for, we have arguments against. So what have we learned in academia in terms of the empirical evidence? Does it look like private equity creates value? And one way to look at that is to look at what happens to accounting measures like profitability and growth under private equity ownership relative to other types of ownerships. And here actually the results are quite positive for private equity. Steve Kaplan studied the buyers that were made in the 80s and showed that they actually had very big increases in operating performance relative to a peer group of firms. And that has been mostly confirmed in other studies in Europe and on private to private deals. With one caveat, which is in the later part of the sample in the US if you looked at the big public to private transactions that have been made, there's a paper now in the Journal of Finance that shows that they do improve things, but not at all to the same degree that the improvements were in the 80s. But still overall pretty big profitability improvements for the firms that are owned by private equity. And actually it goes further than that because there's also evidence that there are some positive spillovers to the rest of the economy. So people argue, for example, that the fact that we had this LBO funds coming in the 80s in the US put so much pressure on public companies to perform because they were scared of being taken over, that they started performing better, they had to become better. And that may be a reason for why public to private buyouts in the later part of the sample don't look like they improve things as much because publics have become better already. So that's one type of positive spillover. There's a recent very interesting paper by Bernstein, Stromberg, Cernsen and Lerner. I think I got all the names right. What they do is they look across countries. They look at, if you compare one country where there was a growth of private equity investment, so private equity investment kind of grew in a particular industry and compare that to another country in the same industry where private equity didn't grow in terms of investing, what's the effect for that whole industry in terms of future growth rates? And the results are actually pretty impressive. It looks like industries with more private equity activity tend to do much better in terms of growth. It's almost too impressive to be true, I think. But that's what they claim anyway. So the evidence here is pretty clearly positive in that private equity ownership seems to make firms more efficient and profitable. So the question then that our Danish friend would ask is is this at the expense of workers and long term investment? So first, in terms of employment, the most comprehensive study that has been done is by Steve Davis and George Lerner and other people on the US where they look at plant level data and look at how much jobs are kind of created under private equity ownership. What they show is actually that private equity owners do fire more people than than other owners and other peer groups. But what they also show is that private equity owners hire more people and the net effect is basically zero. And the way they interpret this is to say there's creative destruction in these firms that private equity takes care of. If you look at some European studies, there's a French study that shows that with smaller deals, that shows that employment actually goes up quite a lot under private equity ownership. So my take on this is that it doesn't really look like these profitability increases are at the expense of workers. What about long term investment? There's also a recent paper in the Journal of Finance that looks at long term investment by private equity investors. What they look at is patenting, and they show that under private equity ownership, patenting doesn't go down. But in fact, actually the patenting that is being done is more efficient, so it's more important patenting. So this is then interpreted as evidence that private equity owners don't sacrifice long term investment. They do invest for the long term. And the last bullet point I have here is also along those lines. That's a study by Henry Kao and Josh Lerner that shows that once a firm exits private equity ownership and goes on to the public stock market, that firm actually continues to do better than a peer group of firms. So it does look like the changes instigated under private equity ownership are not short term, not temporary. They seem to be pretty long lasting. So the evidence here, I have to say, is actually pretty positive when it comes to value creation in private equity. So let me go to some slightly more negative evidence on private equity, and that is the returns evidence. So is it true that actually, because we have all these great operating improvements of the firms run by private equity investors, do we also see very high returns to this asset class for the limited partners? And here the evidence is less impressive. Actually. Private equity definitely makes the general partners rich. It's not so clear on an average that it makes the limited partners rich. By the way, this is an area where we need to do much more research because it's a very hard problem to study because it's not called private equity for nothing. It's very hard to get your hands on these returns, and it's a very illiquid class. So we still don't really know what the returns and the risks are of these investments, which makes it hard to say whether returns are okay or not. But the studies that have been done show that in buyout investing, on an average, returns are at or somewhat below what you would have gotten if you just invested in the overall stock market for venture capital. It's actually higher than what you would have gotten in the overall stock market, but not so much for buyouts. Now, there is a big difference between what are called the top quartile funds and the bottom quartile funds. Because it looks like the top quartile funds, the best players do seem to repeatedly be able to give pretty high returns. But on an average, the returns are not so impressive. So that's kind of a bit of a puzzle, right? I said earlier that private equity seems to create a lot of value for firms, but it's not that impressive returns to investors. At the end of the day, that's actually not hard to reconcile because a lot of the value that is created in private equity goes to either the general partners in the fees that they take, or to the target shareholder companies in the companies that are being bought out. Because if you want to buy a company, you usually have to pay at least say a 20% premium to what that company is traded at to start with. So that kind of dissipates some of the returns to target shareholders. But anyway, the return evidence we need to do more research on. So that's the returns. Now I want to go to the last thing I want to talk about today, which is do we think the leverage in buyouts is too high? And I said before that the buyouts have on average 70% debt and 30% equity. That's about the flip side of what an average public company has. So the average public company has about 30% debt and 70% equity. So do we worry that all this leverage puts companies at risk, workers at risk, and the whole economy at risk? By the way, I should say that the fact that public companies have such low leverage is something that we as financial economists haven't been able to understand for the last 30 decades or something. So there's actually a puzzle why public firms have as little leverage as they have. But the question now is, do buyouts have too much leverage? Now, it is true that leverage is a very integral part to private equity investment. And I think that the high leverage is actually value creating in private equity. I've already touched upon the reasons why we think leverage might actually be positive. And I'll say them again. Here are three points. Firstly, it helps the general partners leverage their expertise over many deals. It improves CEO incentives because they have to work hard to pay off the debt. And the fact that the general partners do have to go out and access debt markets when they want to do investments acts as an extra kind of external check as a gatekeeper on the activities that general partners do. There's also reasons to believe that private equity funds actually are better at coping with high debt levels than most other owners say, like public firms. Why is that? Well, private equity owners are repeat players in debt markets. So they have an ongoing relationship with banks and debt markets, which makes it easier for them to renegotiate the debt. If potentially portfolio firm is starting to go into trouble. And there is empirical evidence that private equity owners do resolve bankruptcy much easier than other owners. Secondly, a private equity fund typically also has some dry powder left in their fund so that they can, if they want to save a company that happens to be in financial distress, they can actually inject a bit more equity. And since they do have the information to know which companies should be saved and which companies shouldn't be saved, they're probably more efficient in dealing with financial distress than public firms are. So maybe the high debt levels shouldn't be such a big concern. And it's actually the case that if you look at historical bankruptcy rates, they are almost as high for just public firms with very low leverage as for LBO firms with high leverage. So not that much bankruptcy so far. We don't know what's going to happen going forward. So leverage has a clearly positive role. What is the risk here? What could be the negative role of leverage? Well, it could be that this whole activity can go haywire. In particular, if you do have debt markets that are overheated so that people are just lending to whoever wants to borrow, which is basically what was happening in 05 to 07, then there's not really any external discipline on the buyout funds in terms of trying to raise debt from the capital markets, because the capital market would just lend to anything that moves. So if that's true, then the external discipline is gone. It's also the case that general partners may have more of an incentive to lever up these deals than maybe their investors would like. Why is that? Well, that goes back again to this split of how the profits are shared. The general partners get part of the upside, but they don't really take the downside. That basically means that gambling can be quite interesting because it's heads, I win, tails you lose. And levering up is a way to basically gamble. So it could be that if the external discipline on general partners doesn't work and the internal discipline doesn't work, then the general partners will just go out and lever up too much and do bad deals and pay too much for them at the expense of their investors. So what does the data say about how leverage is chosen in buyouts? That's something that I studied in a recent paper together with Tim Jenkinson, who is in the audience, and my friends Per Stromberg and Mike Weisbach. So we went out and gathered the most comprehensive database on the financial structure, the leverage in private equity deals, across countries and across time, and tried to figure out what seems to be driving the leverage decision. And this is the aggregate picture that we have. So what I have here on this graph is basically the red line is in a given year, what was the median leverage that was taken in buyout transaction, buyout transactions as a multiple of cash flows. The blue line is how much was paid on an average in these transactions. And this gray line at the bottom is, is the same graph that I showed you in the beginning, which is fundraising activity in the capital markets. What you can see quite clearly in this graph is that this is a cyclical market. And both fundraising activity, leverage and the prices paid in these deals seem to co move. And in particular in times of credit booms, all these things seem to go up. So we had the credit boom in the junk bond market in the late 80s where you see the big spike in fundraising, really high leverage levels, really high transaction prices. Then when the junk bond market died, all of those things came down. Same thing in the period 04 to 07, really high fundraising, really high leverage, really high prices. So it's pretty evident from this picture that cross credit boom seemed to be driving the leverage activity. When we then went in and looked at the individual deals and said, what was it that made a private equity fund choose a certain leverage in a certain deal? We basically couldn't find any type of firm characteristic that explained why you would choose a particular leverage. So it wasn't that firms in what you would think of as a low leverage industry, like software, would have less leverage than firms in a high leverage industry like hotels or airlines. The only thing that we found that drove leverage was how easy was it to get credit, Basically how cheap was credit at that point in time? So that's a little bit unnerving in a sense. And then we went even further. We wanted to say, do we find any evidence that actually it looks like in these times of easy credit that the general partners kind of go way too far, lever up too much and destroy value that way for their investors. And the evidence is actually that that seems to happen. So when we looked at just normal transactions that had a normal amount of leverage for a buyout, which is still a lot of leverage, we didn't find any particular relation between leverage and return. So most of the market seemed okay. But when you saw these deals that really levered up a lot, that typically was associated with significantly lower fund returns. And that seemed to suggest that we did have these incidences where overheated debt markets made it too easy to borrow, it was too easy to do many deals. So transaction Prices went up a lot. The general partners didn't really have an incentive to underpay and this led to lower returns. So this is like another, if you want to see a negative side of private equity, this is some negative evidence that we found. So this maybe says that this market is a little bit too driven by credit in some sense. And maybe we should think about tweaking the model a little bit. And I think that's actually starting to happen. So firstly, we would like these external checks to be better. So we want to regulate the providers of debt, the banks, so that they do their job and actually lend at the right prices to the right deals. And maybe also would make sense for deals that are really unusually levered. It would make sense to to have the limited partners advisory committee have to agree to those deals. So it's not really one of these gambling deals. So there's some evidence of excesses in this market. Am I worried that overall the leverage is so high that we'll see all kinds of bankruptcies going forward that will be costly for the economy? Not really. But this is another area where we want to do a lot of academic investigation because we have a very interesting period now in the buyout market. If you remember that graph that I showed, almost half of all deals that have ever been done historically were done in this boom from 04 to 07. And especially towards the end of that boom, prices were high, leverage was high. Many of these deals have not been exited yet. So we don't really know what's going to happen, whether many of those are going to go into bankruptcy or not. So that will be something that will be very interesting to follow over time. Am I worried? Not really, because we do have some precedents here in the history. So in the latest BOOM in the 80s, we did have about 20% of the deals that were done in the late 80s actually go into financial default. But if you look that how costly that really was for society, it doesn't look like it was very costly because when they came out of bankruptcy, they were actually worth more than they were before the buyout was done. So it didn't seem like a lot of value was destroyed, it's just that they had too much debt. Another thing which makes me less worried about this is that in the latest boom, relative to the 80s boom, the debt that we had actually was at much looser conditions. Firstly, it was less leveraged than in the 80s. Also longer maturities and fewer covenants. So it's probably easier to deal with this amount of debt. That we have in this cohort. But this is something that's going to be really interesting to follow going forward and it's going to put the private equity model to the test. Are they going to be able to deal with these deals that were done in this period at high prices and high leverage ratios? So that's basically what I wanted to talk about. But to conclude, what's my take on kind of the buyout market? Well, firstly, there's a lot more to learn. It's a young industry and we still don't know how it's going to go. What I do think is pretty obvious is that the private equity model has shown itself to create value for the world. It does provide enhanced performance without sacrificing workers a long term investments. It is true that the activity sometimes seems to go haywire when debt is too easy. So it's a bit too reliant on credit markets. I don't think it's very likely that buyouts will pose a big systemic risk. If you compare it to say hedge funds or investment banks that have a much more fragile capital structure with a maturity mismatch where they have to sell all their stuff when things are starting to go bad. That's not the case for private equity. So I'm not very worried about that. It is true that relative to the latest boom years we have, and we will continue to have fewer and smaller funds, probably using less leverage and that's probably a good thing. But I think that this private equity model will endure because it actually makes economic sense. So that's actually everything we know about private equity in maybe a bit more than 30 minutes. So sorry about that. So thank you very much.