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Private equity may be having its moment, but Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) isn't playing that game anymore. Vice Chairman Ajit Jain didn't mince wordsBerkshire hasn't done a single PE-style deal in over three years. Why? They simply can't compete with today's sky-high valuations and aggressive leverage. Jain was candid: the risk-reward tradeoff just isn't worth it. We put up the white flag, he said, explaining that the returns only work when the economy's booming and credit spreads are tight. And when regulators eventually step inas they often dothe music stops.
Buffett doubled down on that logic, but in classic Buffett fashion, he went deeper. This isn't just about dollars and basis pointsit's personal. If what we do at Berkshire doesn't work, I spend the end of my life regretting what I've created, he told shareholders. In contrast, private equity firms can move on if a deal blows up. That's a luxury Buffett doesn't haveand doesn't want. It's not just capital allocation. It's legacy.
The message? Berkshire isn't falling behindit's choosing to sit this one out. While others chase returns with borrowed money, Buffett and Jain are keeping their powder dry. They've seen this cycle before. And they know that when the tide goes out, it's better to be patient than leveraged.
This article first appeared on GuruFocus.