HarbourVest’s Brooks Zug on Carried Interest, Volcker Rule and VC Revival

I don’t have any official responsibilities here at SuperReturn, but did agree to “anchor” a handful of video interviews that will be posted at the conference website (and probably on YouTube). Just completed one with Brooks Zug, senior managing director of HarbourVest Partners, who gave this morning’s keynote address.

A few takeaways from the interview:

*** Zug says that both the buyout and venture capital market have historically experienced lengthy peaks and valleys, albeit not correlated to one another. The VC valley, of course, has lasted for nearly a decade — and Zug believes that it is primed to soon experience a peak. Buyouts, on the other hand, has been down for just the past few years, and Zug argues that there should still be years of pain ahead.

*** Zug does not believe that the change to carried interest taxation — were it to eventually pass – would have much of an impact on the private equity market (save for some GP/LP discussions about revising fund terms, which he thinks will fall flat).

*** Zug does not believe private equity poses the type of systemic risk suggested by the Volcker Rule, but admits that kicking banks out of private equity would be good for firms like HarbourVest. Not only would HarbourVest’s funds-of-funds have less competition, but its secondary funds might have buying opportunities from divesting banks.