Across the buyout industry and around the world, limitations on available credit have had a dramatic effect on the global economy and the pace of new investing. I expect that economic difficulty and the malaise in the deal business will continue well into 2009. However, these issues will have different effects and implications on different geographies and sectors in the alternative asset market.

The number of buyout deals valued at $250 million or less will continue to drop in 2009, but not as significantly as in the large cap market. The large cap market will be down for a number of years. Importantly, the private equity model is not broken and the business is not dead as some would like you to believe. Over the next 24 months, we expect to see very attractive investment opportunities as valuations adjust to the environment. We believe that those institutional investors who have the liquidity and a stable portfolio like Baird Private Equity (BPE) will have a once in a generation opportunity to invest.

In the venture and growth equity markets, despite the current state of the credit and equity markets, I believe that 2009 will be a good year for investing. We are seeing a very healthy flow of opportunities and valuations have and will continue to come down. Syndicate capital in the near term is not as readily available so we have to be careful about funding our companies through the difficult environment. Regardless, 2009 should provide unique opportunities to invest in quality companies at attractive prices, and venture and growth equity firms with capital on hand will be in a good position to act.

In terms of fundraising, we believe that LP appetite for funds will be down meaningfully in 2009, which is likely to be healthy for the business. However, we believe that the buyout, growth equity, and venture capital funds focused on investing in smaller, high potential companies will continue to generate attractive relative returns. As a result, capital will continue to be available to the better funds at this end of the market. We believe that we will see a number of marginal players unable to raise new money and exit the market both in the buyout and venture side of the business. We expect that those funds who have and continue to focus on operational value add, modest leverage and business building will be the winners in today’s market.

At BPE, we are generally optimistic about our longer term prospects, as we are seeing good opportunities, better lender discipline and more advantageous valuations. We believe that maintaining our strong fundamental approach with an unwavering focus on our portfolio will be the key to success in 2009 and beyond.

As we look at investing in our various markets around the world, we continue to see the many advantages of investing in China and are bullish about our investing activities there. Though far from immune to the world economic issues, China continues to have many of the right elements for profitable and productive investing especially given our long-standing and proven BPE approach. We will continue to focus on investing in industries we know well with a long-term perspective and only in the lower end of the market. We bring differentiated talent, expertise and resources to help our companies grow their revenue and profits and we use modest leverage to achieve our returns. Finally, we use our global platform to help our companies access new markets and leverage the geographies best suited to manufacture their products.