Market risk is the risk of long-term changes in interest rates, exchange rates and economic risk. Certainly all of these have been factors in the less than spectacular private equity returns recently. Investment-specific risk is probably the most important source of risk in recent times, as many private equity investments suffered significant losses as a result of the subprime mortgage and real estate meltdown. Tax risk is the risk of tax changes over time, which has not been a significant factor in private equity valuations recently. |
