APPETITE for private equity is at an all-time high, and that should not be a surprise. Interest rates remain low and, depending on whom one consults, long-term future returns from traditional markets are expected to be pedestrian at best, or at least paler than the returns of the past 10 years.

Historical returns from PE have been strong, and investors get the benefit of an investment uncorrelated with traditional markets. For institutions and private investors who can stomach the illiquidity, a PE investment is attractive - even compelling - at a time when pensions' funding gaps are widening, and the number of publicly traded companies in the US continues to decline from a peak of about 7,300 in 1996 to around 3,600 today.

For traditional assets, the macro environment is also worrying, as the trade conflict between the US and China raises risks. The OECD recently cited an expected rise of just over 2 per cent growth in world trade this year - the lowest in a decade - and warned that trade disputes are hurting manufacturing and generating significant uncertainty that weighs on investment decisions. Fitch has forecast a 2.8 per cent global growth this year, compared to 3.2 per cent in 2018. But tit-for-tat retaliation on tariffs between the US and China could significantly dampen world GDP next year. To be sure, private investee companies are not spared the toll of an economic slowdown, but PE's long lock-in period may help to mitigate the risks arising from the economic cycle.