Echoes: When the crowd pivots, stay grounded in fundamentals
February 11, 2026
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9 min
Nitin Gupta, Managing Partner at private equity specialists Flexstone Partners, says building wealth is about consistent, understandable growth rather than chasing the next fad, and that patience and adaptability always win out against the next prediction of doom.
As we reflect on the past 25 years of investing, is there one market event you see as leaving a lasting legacy?
Nitin Gupta (NG): It's tempting to look for a single defining event, but I've found there isn’t one. My 30-year career – from my start at Merrill Lynch in M&A in 1995 to my long stint in private equity since 1997 – has spanned the Asian currency crisis, the collapse of Long-Term Capital Management (LTCM), the dotcom bust, 9/11, the GFC, the eurozone crisis, Covid, and the subsequent supply chain disruption, inflation and rapid rise in interest rates, along with countless geo-political events and uncertainties.
Every dislocation feels unique at the time, but the only real certainty is the persistence of uncertainty. Sir John Templeton said that the four most dangerous words in investing are ‘This time it’s different’. It’s rarely true because crises differ in their contour, yet human behaviour and market cycles do seem to have remarkable echoes.
Take LTCM in 1998. This supposedly fail-proof hedge fund run by Nobel laureates collapsed spectacularly, requiring government intervention. That was quickly followed by the Asian currency crisis and US political turmoil. Each ‘unprecedented’ event came with calls that private markets would be devastated.
Fast forward, and you see the dotcom collapse in 2000, the Enron scandal, then 9/11 – which, for the US, was a shock of unique scale. And each time, the predictions of doom were everywhere. But patience and adaptability have always won out.
What about the Covid shock? Were there any specific lessons to draw from that event?
NG: Covid was astonishing on the human tragedy level first and foremost. But if you’d told me that over one million people in the US alone would die, I’d have expected a much worse outcome for economies. Who could have predicted the US economy would recover as strongly as it did within a year? The bounce-back highlights how resilient markets are.
And the lesson is that if you focus too narrowly on the short term, you’ll miss this pattern of recovery. As investors, we must have a long view – month-to-month or quarter-to-quarter thinking leads you astray, since you never have the same event twice. Each crisis is specific, but recovery is consistent.
How difficult is it to navigate the investment landscape knowing the next crisis could come from an unexpected place – or what former options trader and author Nassim Nicholas Taleb called a ‘black swan’ event?
NG: You must accept the reality of unknown unknowns – to that extent, Donald Rumsfeld framed it best. In short, we just don’t know the full range of risks ahead. That’s why a long-term horizon is so critical, particularly in private equity.
Public markets may swing wildly quarter to quarter, but over 10, 15, 20, 25 years, persistent value comes from discipline. The private equity asset class has, in fact, outperformed over long periods. Yearly head-to-heads can be deceiving – sometimes public markets explode higher in a year, but the cumulative growth impact of private equity emerges over the long term.
Indeed, US economic history is a story of long-term resilience; GDP growth is like a ‘hockey stick’, even though there are frequent dips. Periods labelled ‘the death of US exceptionalism’ have been overly exaggerated and proven wrong. But investors get anxious during these dips and crave prediction and reassurance. Often it seems that everyone wants to be the next big crisis-caller – like how Michael Burry is portrayed in ‘The Big Short’ – yet things usually recover for the patient and thoughtful.
Does surviving multiple market cycles change your appetite for risk?
NG: Not fundamentally. If you back strong companies led by capable management, you come through tough times. Most failure isn’t from industries shifting overnight, but from weak leadership. In private equity, we insist on working with funds that are hands-on with their portfolio companies, especially those led by teams who’ve managed through multiple crises.
Because experience matters. For instance, after the GFC or Covid, good funds were quick to action – tightening spending, preserving liquidity – that helped solid managers shepherd companies through to recovery. Creating a well-diversified portfolio and investing with experienced funds who know their sectors and markets well and have a strong network of operating partners and executives who can step in to help their portfolio companies is vital. No matter the external shock, hands-on guidance and a strong network make management teams more adaptable and resilient.
How important is diversification in private equity?
NG: It’s fundamental, because no one can predict what will outperform or not. Time and again, sector-specific bets have backfired. In 2000, crowding into technology was dangerous – Cisco was seen as invincible. Today, that would be Nvidia. But who knows when markets turn, and a sector or company falls out of favour. That’s why we build highly diversified portfolios by industry and by number of investments, so one misstep doesn’t wreck returns.
The key themes for us are, first, investing in mission-critical companies, especially those that provide high value for low cost. Second, we pursue buy-and-build strategies in fragmented markets, where our platform investment can consolidate smaller firms, extract synergies and average down entry multiples. And third, we back businesses that effectively use technology/digitization for operational improvement and efficiency– we avoid speculative ‘tech for tech’s sake’.
Flexstone was founded just before the GFC. Did the magnitude of the crisis change your investment approach?
NG: Being in New York during the GFC, the distress was palpable. Funds had overleveraged companies, and when sales dropped, covenant breaches and distress followed.
Getting the industry call wrong can happen, but backing strong management teams is more critical. Good managers find ways to manage through difficulty – even in sectors under strain. Ideally, you want sponsors with scar tissue – those who have led companies through prior crises. We invest with funds where the principals have seen cycles across decades. It’s impossible to have a zero-loss portfolio, but experience and humility reduce the odds of disaster.
