The big write-downs being announced by private equity houses like Kohlberg Kravis Roberts, Candover and Blackstone are partly due to the high leverage that has been used to do deals in recent years. Leverage works extremely well in a booming market, but can spell disaster very quickly in a down market. As soon as portfolio companies’ earnings fall, leverage ratios become even higher and the banks are not happy to continue having loans outstanding.

Investors in the secondaries market should beware substantial discounts to net asset value (NAV). Buying a fund at a 60 per cent discount may look like a good deal, but unless you properly analyse all of the underlying companies, you could find your 60 per cent discount to NAV in September becomes a 15 per cent discount in December and a small premium in June.

Venture capital (VC) funds are in a different position. There is no leverage, which is a plus point, but because of widespread risk aversion it is difficult for many companies to see where their next round of funding is coming from. Exits are also very uncertain. This makes it very difficult to price VC funds: an 80 per cent discount is not unusual. This is not to say the underlying companies are bad, but investors are pricing in their non-transparency and unpredictability.

The problems of venture are worrying because it is not big public companies that create employment. Venture has the potential to grow fast and create a lot of jobs, and it’s a huge part of the engine behind a country’s economic growth.