Alts Innovators: UT Austin’s Dr. Ken Wiles on Private Equity

Private equity is entering a period of adjustment after decades of expansion fueled by falling interest rates and abundant capital. That long-running tailwind reversed beginning in 2022, when interest rates rose sharply, disrupting deal activity, slowing exits, and bringing renewed attention to a long-standing vulnerability in private markets: liquidity. Industry reports have highlighted softer fundraising, longer holding periods, and growing pressure on pension funds and other long-term investors to generate cash distributions. At the same time, advances in AI, cloud computing, and on-demand development talent are lowering the cost of building companies, reshaping how entrepreneurship and private capital intersect.

So, what happens to private equity—and to entrepreneurs—when liquidity dries up, valuations adjust quietly, and technology makes it cheaper than ever to build a business?

Welcome to the fourth and final episode of our mini-series on the alternative asset market. Tuesdays with Morrisey host Adam Morrisey welcomes Dr. Ken Wiles, a clinical professor of finance and the Executive Director of the Private Equity Center at the McCombs School of Business at the University of Texas at Austin. In this episode, we explore the evolution of private equity from the early LBO era to today's liquidity constraints, and why Dr. Ken believes this is the best time in history to be an entrepreneur.

With decades of experience spanning investment banking, software, restructuring, and academia, Dr. Ken brings a rare blend of practitioner and academic insight into private markets.

Top Takeaways

1. Dr. Ken explains how lower discount rates, the development of the junk bond market, and abundant inefficiencies in the 1980s created the perfect runway for PE to grow from a niche into a $22T asset class.
2. When the Fed raised rates at the fastest pace in its history, valuations dropped sharply. Unlike public markets, however, private-market declines play out quietly. Fundraising slowed, deal flow fell, and many firms extended maturities, restructured portfolios, or "extended and pretended" — largely out of view of anyone outside the industry.
3. Liquidity is the biggest risk in private equity today. Pension plans, which provide two-thirds of all PE capital, aren't receiving distributions as quickly. Without liquidity, returns fall, fundraising slows, and many funds will struggle to raise their next fund, which may lead to consolidation across PE and VC. Liquidity doesn't matter until it does and then it's the only thing that matters.
4. Dr. Ken sees the rise of new technologies leading to a new golden age in entrepreneurship. Thanks to AI, cloud infrastructure, and on-demand development talent, the cost of building a company has collapsed. Tasks that once required millions and large teams can now be executed by small groups in weeks. Barriers to entry have never been lower.

Topics Covered

• The origins and evolution of private equity
• The impact of interest rates on four decades of private equity returns
• The 2022–2024 "private market crash" no one saw
• Liquidity challenges and their impact on pensions and funds
• How private credit prevented a maturity crisis
• Manipulated unicorn valuations and extend-and-pretend dynamics
• The new economics of entrepreneurship in an AI-enabled world
• College students, AI, and modern career preparation
• The shrinking operating costs of building software
• Entrepreneurship through acquisition and the rise of search funds
• Why more businesses will be built with smaller teams
• The growing consolidation of trades, CPA firms, and local service businesses
• The future of private equity, venture capital, and public markets interplay

Dr. Ken Wiles is a Clinical Professor of Finance at the University of Texas at Austin and Executive Director of the Hicks, Muse, Tate & Furst Center for Private Equity Finance at McCombs, where he focuses on private equity, valuation, and corporate finance. He brings decades of practitioner experience as a former COO and CFO of multiple companies, including firms taken public and one sold to Oracle, as well as a leader of restructuring, investment banking, and asset management firms. Widely published in leading academic and practitioner journals and a former chair of the Nevada Economic Forum, Dr. Ken also serves on investment committees and boards, bridging academic insight with real-world private market expertise.