Merryn Talks Money: Permira's Kurt Björklund — Where Are We in the Private Equity Cycle?

Date: December 15, 2025
Host: Merryn Somerset Webb (Bloomberg)
Guest: Kurt Björklund, Executive Chairman, Permira

Episode Overview

This episode features a candid, in-depth conversation between Merryn Somerset Webb and Kurt Björklund, Executive Chairman of Permira, one of the world’s leading private capital firms. Together, they explore where we currently stand in the private equity (PE) cycle after several challenging years, what sets true private equity apart, how performance should be measured, and who PE is best suited for. Importantly, the discussion covers the interaction between private and public markets, the impact of technological transformation (especially AI), and the shrinking universe of public equities.

Key Discussion Points & Insights

1. The State and Cycles of Private Equity

• PE’s Performance Cycles and Recent Challenges

  • Kurt traces the industry’s mega-cycles: periods of strong performance, exuberance, capital inflows, a market “heart attack,” and subsequent reset.
  • The latest cycle involved COVID disruptions, inflation, rapidly rising interest rates (from near-zero to 4%), and valuation corrections in private markets, resulting in slowed exits from 2022–24.
  • Meanwhile, public markets (especially the US) outperformed expectations during this period, making PE’s illiquidity less attractive by comparison.
  • (03:27) Kurt: "Over the last three years or so, [private equity] has not looked good enough comparatively in terms of the liquidity lockup... compared to what the public markets has delivered."

• Growing Pressure from Public Market Outperformance

  • Referenced State Street PE Index has underperformed the S&P500 across all ten-year periods, which was a shock to many in PE.
  • Not all funds calling themselves PE are the same; some merely own private companies without enforcing PE’s governance and transformative model.

2. Defining Real Private Equity

• “Control, Governance, and Transformation”

  • For Kurt, true PE is about control: buying majority stakes, selecting assets where the GP’s expertise matters, and then driving long-term strategic, operational, and organizational transformation.
  • There’s a blend of patience and urgency—enough time to implement change, but a defined holding period.
  • Alignment structures ensure management teams and GPs are incentivized by outcome (via ownership and carried interest).
  • (06:52) Kurt: "Private equity means to me is control, buyout governance..."

• Contrast with Non-Control Stakes & Financial Engineering

  • Stakes below control or without transformation are more in the realm of “alternatives” than PE.
  • Use of debt (leverage) should amplify, not drive, returns; genuine value comes from EBITDA growth, not just financial maneuvers.
  • (10:32) Kurt: "Financial engineering can modestly amplify the outcomes, but it should never be an existential reason for making an investment."

3. Where Are We in the Current Cycle?

• Boom, Bust, and Schumpeterian Renewal
  • Exuberance leads to shakeouts. Current environment is year 3–4 of such a cycle ("out of four, five") where non-performers shrink; top GPs survive and thrive.
  • Firms with portfolios of high-growth, recurring-revenue companies withstand valuation corrections; those reliant on leverage and weak growth struggle.
  • Time and compounding are allies—high-quality companies grow into their valuations even after corrections.
  • (13:12, 16:13) Kurt: "We love shakeouts in the industry because... those GPs that have not performed... might not raise any funds... proper Schumpeterian destruction."

4. Comparing Public and Private Markets

• Stock Picking and Survivorship

  • Massive public market performance is concentrated in a few stocks (“Magnificent Seven”); most of the S&P 500 delivers mediocre performance.
  • PE offers different access: persistent outperformance is more likely among top GPs in specific sectors than among public stock-pickers. Entry and persistence barriers are higher.
  • (19:16) Kurt: "If you were smart enough... to pick the companies that became the Magnificent Seven, you would have done phenomenally well. [But] there's a survivor bias..."

• Myth of Golden Age and Competition

  • Recollections of 1996 and 2008 illustrate the perennial sentiment that “the best years are past”—but the field remains highly entrepreneurial and dynamic.
  • (22:14) Kurt: "Nothing has been more persistent in my journey... other than our returns, has been people thinking that the golden years are past."

5. Themes and Pivots for the Next Decade

• Creative Destruction and Technology Dominance

  • Near-term: Continued shakeout, leading to stronger, fewer market leaders and a “healthier” competitive environment for major GPs.
  • Tech and AI are existential: every industry (pharma, B2B services, etc.) will be transformed by AI applications. Getting this right is an "existential" challenge, not just an opportunity.
  • (28:11) Kurt: "The pharma industry is going to get completely transformed driven by AI over the next 3, 4, 5 years... Getting that right is existential."

• Back to Basics: Control and Transformation

  • Expect a return to the roots of PE: asset selection, active governance, real transformation.
  • Scrutiny on products that call themselves PE but function more as alternative wrappers.
  • (32:33) Kurt: "I think you're going to see a bit of circling back to the roots and the core essence of what should private equity really be."

6. Discussion of Exits and Public Market Decline

• Changing Nature of Exits

  • Fewer public companies; IPO is not the only or even likely exit. Buyers increasingly include strategic acquirers and other PE/alternative investors.
  • Many growth businesses are now too large for traditional public markets or more attractive to remain in private hands.
  • (34:22) Kurt: "The number of public companies in the United States has fallen from let's call it 8 and a half thousand, 9,000 to... 4,500, 4,800..."
  • (37:28) Kurt: "A ‘strategic’ is a large company... buying a smaller company because it fills a gap... or otherwise is highly synergistic..."

• Societal Implications of Fewer Public Companies

  • Less access for retail investors to growth companies; public markets have become less attractive due to regulatory, media, and indexation changes.
  • Problem is particularly acute in the UK; Swedish markets are a rare exception, with an active retail IPO culture.

7. Who Should Own Private Equity?

• Illiquidity and the Right Investor Profile

  • Trade-off is clear: illiquidity in PE demands a return premium, but only investors with long time horizons (pensions, sovereign wealth, very high net worth) can truly afford it.
  • Semi-liquid retail products rarely deliver the same returns and carry their own risks; retail investors usually need more liquidity than PE can provide.
  • (39:36) Kurt: "[PE] grew up from institutional investing... entities that have capital duration... very happy to make [the] trade-off."
  • (43:35) Kurt: "They're buying a wrapper where the underlying product is not that liquid and understand the constraints that comes with that."

• Access for High Net Worth Individuals

  • The best wealth managers can help build a diversified, high-quality PE portfolio for qualified clients—if and when leading GPs are raising capital.
  • (45:49) Kurt: "The best wealth managers will have the best GPs on their... shelf... they will be able to commit into these products."

• Rebuttal to ‘PE Only Benefits the Rich’

  • Most PE investors are not individuals but pensions/insurance funds whose beneficiaries are broadly represented.
  • (44:42) Kurt: "If you look at most like 90 plus plus percent of our investors, they are actually pension funds... beneficiaries are really not already very rich."

Notable Quotes & Memorable Moments

• On Defining PE’s Edge
  • (06:52) Kurt: "Private equity means to me is control, buyout governance..."
• On Industry Renewal
  • (13:12) Kurt: "We love shakeouts in the industry because what that, that's proper Schumpeterian destruction..."
• On Survivorship Bias in Public Markets
  • (19:16) Kurt: "If you were smart enough... to pick the companies that became the Magnificent Seven... you'd have done phenomenally well."
• On Technology’s Impact
  • (28:11) Kurt: "The pharma industry is going to get completely transformed driven by AI over the next 3, 4, 5 years... Getting that right is existential."
• On Societal Effects of Fewer Public Companies
  • (47:34) Kurt: "It's bad because then for those perhaps retail investors who cannot or choose not to invest in private equity, they find it harder then to own the kinds of companies that would be good diversifications."
• On Persistent Industry Challenges
  • (22:14) Kurt: "Nothing has been more persistent... than people thinking that the golden years are past."
• On Who Should Own PE
  • (43:35) Kurt: "They're buying a wrapper where the underlying product is not that liquid and understand the constraints that comes with that."

Timestamps for Key Segments

• 03:00 – Setting the scene: Why PE has underperformed public markets lately
• 05:58 – What private equity really means: governance, control, transformation
• 10:19 – Role of debt and why financial engineering is not central anymore
• 13:12 – Mega cycles in PE and where we are now ("year 3–4 of 4–5")
• 16:13 – Consequences of slow valuation adjustment and portfolio characteristics
• 19:10 – Comparing public market winners with best-in-class private equity
• 22:14 – Has competition made PE harder than 20 years ago? ("Golden years are always past...")
• 27:50 – The shape of the next decade; impact of AI and technology
• 32:33 – Return to roots: Clarifying what is real PE and what isn’t
• 34:22 – Exits: IPOs, strategics, and the filling of the public market gap by PE
• 39:36 – Who should own PE? Institutional, high net worth, retail—risks and access
• 44:42 – Misconception: Only the rich benefit from PE
• 45:49 – Access pathways for high net worth individuals
• 47:34 – Societal implications of shrinking public markets and UK-specific issues
• 49:00 – Regulatory and indexation pressures in the public markets
• 51:59 – Book recommendations: Masayoshi Son biography by Lionel Barber

Book Recommendation

• Masayoshi Son: A Biography by Lionel Barber
  • (51:59) Kurt: "I am reading at the moment the fantastic biography on Masayoshi's son by Lionel Barber.... I tend to read stories about exceptional people."

Tone and Language

The discussion is relaxed but rigorous, with Kurt offering detailed, first-hand insights from over 25 years in private equity. Merryn probes both the structural strengths and challenges of the industry and keeps the focus on how real-world investors—from pensioners to billionaires—should view the role of private equity in long-term portfolio construction.

Summary

Kurt Björklund candidly addresses the cyclical nature of private equity, the persistent need for a disciplined, transformative role, and the folly of commoditizing or mislabeling alternative investments. While the industry is emerging from a disruptive phase, those firms and investors who stay true to real PE’s roots—long-term selection, governance, and operational transformation—will likely continue to deliver. Nonetheless, the broader shrinkage of public markets remains a societal challenge, with deep implications for access and financial fairness.

For institutional and very high net worth investors with long time horizons and a taste for operational rigor, PE remains compelling—even if the public markets are currently winning the short-term race.