the rise of <u+201c>populist<u+201d> politicians in western nations could challenge the ability of private-equity firms to do business and make money, according to a report from hamilton lane, one of the largest advisers to investors in the industry. the backlash against globalization may cause higher taxes on private-equity firms, create more regulation, drive more volatility and restrict economic growth, hamilton lane<u+2019>s annual review said. the report was seen by the wall street journal after it was shared at a meeting with investors in london. hamilton lane advises pension funds and other institutions on $275 billion of investments. private-equity firms are attracting funds as investors seek higher returns during a time of very low interest rates. about $225 billion of private equity capital was raised to target u.s. companies last year, the most since 2008, according to dow jones lp source. washington-based carlyle group lp said wednesday that it plans to raise $100 billion in the next few years to add to the $169 billion it manages. carlyle<u+2019>s shares have risen 3.1% so far this year. carlyle declined to comment on the hamilton lane report. populist forces are stoking the rise of <u+201c>anti-trade, anti-elite<u+201d> candidates such as donald trump and bernie sanders and far-right politicians in france, hamilton lane said. those forces also spurred britain<u+2019>s vote to leave the european union, which is a <u+201c>longer term problem<u+201d> for private equity, the firm said. <u+201c>the repercussions of this populist wave are not trivial,<u+201d> hamilton lane said. <u+201c>the next global economic downturn will not be caused by an economic event. rather, it will be triggered by the aftereffect of a populist movement in some part of the developed world that succeeds in shifting some tax, or regulatory, or political regime dramatically.<u+201d> private-equity firms have faced accusations of asset-stripping from some politicians and labor unions for decades. in recent years, firms in north america and europe have become more regulated and many have tried to win over critics by disclosing more information about their activities and arguing that they can help boost economic growth and employment. <u+201c>the best way for the industry to positively position itself with lawmakers is to educate them on the sustainable economic and social benefits of private equity,<u+201d> said james maloney, spokesman for the american investment council, which represents private-equity firms in washington. hamilton lane said <u+201c>one of the key underpinnings<u+201d> for private-equity firms in the u.s. has been an economy in which corporate profits have risen as a share of gross domestic product, while wages have fallen as a share of gdp in the past 50 years. one reason for this is the <u+201c>loss of negotiating leverage by labor in the developed world,<u+201d> the report said. <u+201c>given the opportunity to purchase a fast-food franchise in the u.s., would you do it? if wages are pressed up legislatively, your profit margins become dramatically compressed,<u+201d> hamilton lane said. <u+201c>instead, if you successfully automate your workforce, your profit margins increase dramatically. but would doing-so cause a political and social backlash?<u+201d> private-equity firms can help create jobs, according to michael collins, chief executive of invest europe, which represents private-equity firms in brussels. <u+201c>what private equity is very good at doing is channeling capital from those sources where it<u+2019>s in supply to those places where it<u+2019>s needed,<u+201d> he said. write to simon clark at simon.clark@wsj.com
private equity threatened by <u+2018>populism,<u+2019> hamilton lane says  - wsj
simon clark