Bain Capital LLC’s Stephen Pagliuca said headwinds to the U.S. economy such as rising interest rates and the government’s debt burden will be partially offset by cheap oil and gas from the country’s shale reservoirs.
“The salvation of the United States is the big oil and gas boom going on right now,” Pagliuca, a managing director at Bain, said today at a conference in New York sponsored by the nonprofit organization Youth Inc. “This shale boom will last a long time. We can be a net exporter by 2020.”
Shale oil and gas has led to a boom in energy production, pushed natural gas prices lower, and by some estimates may allow the U.S. to meet its energy needs with domestic resources for the first time in decades. To tap the resources, millions of gallons of water are mixed with chemicals and sand and shot underground to break apart rock and free trapped gas or oil. Critics have said the process, known as fracking, endangers water supplies, while the industry maintains that no confirmed case of such contamination has been demonstrated scientifically.
Pagliuca, who helped build Boston-based Bain into a private-equity firm with $70 billion in assets under management, said the largest challenges to the U.S. economic recovery are the effects of slowing stimulus and swelling national debt. The government’s actions to address the deficit have not been swift enough, he said.
“If you look at politicians, they’ve only reacted to crisis,” said Pagliuca, a co-owner of the Boston Celtics. “In Greece everything was fine and people were at the beach and they were sipping ouzos until everything fell apart. And everything’s going to be fine here until it isn’t fine.”
Pagliuca said he sees opportunities for private-equity deals in the U.S. as health care is reformed and technology companies seek to lower the cost of medical care. He also pointed to opportunities in China.
“I don’t see a dramatic crash in the future,” Pagliuca said. “You still have a population that needs to lift up, and you have growth rates of 7 to 8 percent.”
Bain last year raised its second fund dedicated to Asia, closing on $2.3 billion. The firm’s previous Asia fund, raised in 2007 with $1 billion, had a 4.3 percent net internal rate of return as of Sept. 30, according to data from California State Teachers’ Retirement System, an investor in the pool.
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