THE chief executive of one of the world’s biggest private equity groups said yesterday that he could imagine the creation of the world’s first $100 billion (£56 billion) private equity fund within ten years.

Speaking to The Times at the World Economic Forum (WEF) in Davos, Martin Halusa, chief executive of Apax Partners, said that if the $100 billion fund became a reality, it would put many of the world’s biggest companies within the grasp of private equity groups, opening a vast new marketplace for their investment activity. The $100 billion fund would be ten times the size of the biggest private equity funds at present.

Dr Halusa said: “The private equity industry is set to grow hugely. It has delivered better returns than many other asset classes and institutions are increasing their asset allocations.”

Private equity experts believe that the mountain of money from institutional investors seeking to invest in private equity will ensure that the biggest funds grow exponentially. The increasing size of such deals has forced private equity groups to team up to tackle these huge investment opportunities. They have also taken on huge amounts of debt, which has triggered fears that some deals may be over-leveraged.

Yet while some private equity experts may concede privately that some deals are over-leveraged, they deny that it is an industry-wide problem, arguing that unless there is a steep rise in interest rates, a major recession or a shock to the world economy, the market will continue to flourish.

David Rubenstein, co-founder of US buyout firm the Carlyle Group, said he believed the amount of money flowing into private equity was not disproportionate and the boom showed no signs of abating. “It is obviously frothy but I have not seen anything that I think will cause a gigantic crash in the near future,” he said.

The transformation of private equity from a niche, alternative investment to a crucial part of the mainstream economy, was one of the hottest talking points on the first day of the WEF.

Jacob Wallenberg, chairman of Investor AB, told The Times that he believed that the rise of private equity had altered the investment landscape. Mr Wallenberg said that the huge financial rewards in private equity had made it more difficult to attract bright people to public companies. Mr Wallenberg said that 15 per cent of his own business was now in private equity and venture capital. He said that he believed that there were many different types of investment opportunities — including private equity and venture capital, as well as more conventional investment deals.

The news came as Joseph Rice, a founder member of Clayton Dubilier & Rice, one of the world’s oldest and most established private equity groups, sounded a note of caution about the market. Mr Rice, who is regarded as an industry legend, said that the private equity market had reached an “inflection point” and, for the first time in years, he was unable to see the way ahead.

Mr Rice said that the rise of the $10 billion private equity fund, where companies have to invest about $2 billion a year over five years, had created some uncertainty. Of some of the “club” investment deals agreed by rival firms, he argued that unless it was clear who was in charge of an investment, private equity groups who took part in club deals were in danger of leaving themselves open to problems in the future if difficult decisions needed to be made.

Mr Rice said that in contrast to many of its rivals, Clayton Dubilier & Rice insists on having management control when it takes part in club deals to ensure leadership issues were clear and that it remains in control of its investments.