The rise of private equity is also correlated with major drops in the top marginal income tax rate and the maximum capital gains tax rate in the US. When indivi

The rise of private equity is also correlated with major drops in the top marginal income tax rate and the maximum capital gains tax rate in the US. When individuals become so wealthy they couldn't possibly spend all of their wealth, this creates an a new market of extremely wealthy clients with a risk appetite. Financiers can cater to this clientele with exotic investments that feature more concentrated risk/reward and pay out exclusively to the uber-wealthy and institutional investors: Private equity, hedge funds, and venture capital.