State of Private Equity? (Temperature Check)

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Bit of a rant but here's some stream of consciousness thoughts:

1. PE as an asset class is here to stay. Returns may continue to come down but I think the combo of leverage, active mgmt, timing mgmt, illiquidity premium, and a less efficient market will lead to privates continuing to outperform public equities
2. Private equity is in it's plateau phase. As I mentioned before a benefit of PE is less efficient markets and limited set of buyers. Well as the asset class has grown - that has become less true. In 2001, there was ~150B of dry powder globally and now there's closer to $2.5 Trillion. Every decent asset has gotten bid the fuck up - even shitty assets have grown extremely expensive. A meh PE fund could still easily generate 2x + 15 years ago simply through multiple uplift and high LTV's. Now if your fund isn't extremely disciplined you can easily lose your shirt on deals. All this is to say - LP's are generally tapped out on the quantum they want to commit to PE - esp. as there are fewer funds which deliver exceptional returns. 
3. Internal Competition - Not sure about anyone else in PE, but I notice that the MD's, while smart, aren't truly differentiated thinkers or even all that exceptional. They're smart, yes, but if you were to place them in our shoes (Associates fighting for 1-2 VP slots), I doubt many of them would've succeeded. All that is to say - outside of some funds poised for outside growth, I don't think PE is the place to become a centimiilionare in the way it once was. You'll be comfortable yes, but between fund sizes stalling out and competition getting more fierce for promotions - the expected value of a life in PE I think is closer to tens of millions. Clearly that's not bad, but it's closer to being a corp. law or sr. partner in consulting or at a bank than it is to being a highly successful founder. 

Net net, I still think starting your career at a good PE fund is definitely worth it. The mindset you develop is awesome for future endeavors, the money is obviously great, and you develop a solid network amongst your class. The option value is great as well. Many PE shops will carve out a portco role for you after your Assoc. years if you raise your  hand, you can do a HF, set up well for B School, etc. 

As for me - I'm coming to the end of 3 years at a UMM/MF type shop. Has been an OK experience thus far - I haven't gotten destroyed with work, and have been a bit more portco. focused, but still closed a few deals. I'm planning to leave in about 2 months and join a more focused strategy of PE fund that touches on a space that historically hasn't taken much private investment, but is beginning to change that. Upfront comp is a bit lower, but hoping it's a place that will have some outsized growth akin to the modern MF's 20 years ago. 

It’s all commoditized bruh. Banking, PE, consulting, HFs. Who cares? They’re all here to stay. Like with all cycles, now that the ZIRP days are over the wheat is going to stay and chaff is going to blow away. 

The success of PE was driven by a 40 year declining rate environment. Returns will come down, managers are commoditized, yet it’s still worth 2-3 years of your career. Not sure about the long term, but a valuable experience.

Can use this experience to buy or start your own business, which is the ultimate end goal

Personally have started to see funds expand to non traditional PE plays. Going forward, returns will come down in cookie cutter PE industries. Will be interesting to see how far firms push their mandates in response to generate alpha

Edit, thank you guys for replying and for all the info. I really appreciate you all!

You're right  private equity is definitely facing headwinds with high interest rates, tough fundraising, and too much dry powder. Just like timing matters in investing, knowing the right 180 c to f oven conversion can make a big difference in the kitch!