The debate over private equity is now becoming shrill. In the UK, members of parliament have been attempting to interrogate private equity bosses, generating more heat than light. In his first press interview, with the Financial Times this week, Alistair Darling, the new chancellor of the exchequer, was alive to the controversy. Outside the Westminster village, Kohlberg Kravis Roberts is set to raise $1.25bn in a public listing, following its rival Blackstone into the public markets. All this suggests two questions: one is political, about whether private equity is a blessing or a curse; the other is financial, about whether we are in a private equity bubble in which investors should take great care.

There should be no question that private equity has a role to play in financial markets. Publicly-listed companies have their weaknesses: partly that everyone from Congress to Greenpeace is able to impose onerous demands on them; more fundamentally, public companies can be prone to - in the words of Adam Smith himself - "negligence and profusion" on the part of managers. It is because of these weaknesses, coupled with cheap money, that private equity is having its day in the sun, not to mention under the interrogation lamp.