Blackstone posted a loss of $1.16bn for 2008 and marked down private equity and real estate holdings by 20 to 30 per cent, on top of earlier writedowns. Heavily indebted holdings such as Hilton Hotels and Freescale Semiconductor will struggle to service debts. Likewise, KKR's European listed vehicle also saw nothing but red ink. It slashed valuations by 48 per cent as companies such as First Data, Alliance Boots and ProSiebenSat struggled. The picture will be the same for many deals done by still private competitors, particularly the most aggressive 2006 and 2007 vintage.

It is too early to write private equity's epitaph. True, the copious debt that made many leveraged buy-outs so lucrative is gone for now and many equity holdings will go to zero. But distressed markets also present opportunities for long-term capital. Blackstone's $25bn cash pile, for example, is an attractive alternative for cash-hungry companies that can no longer turn to competitors or public markets when selling subsidiaries. And private equity firms possess a useful set of skills in today's economy, which Blackstone's CEO dubbed a “depression”. Restructuring expertise and the ability to wring cash out of challenging balance sheets will come in handy indeed.