Wednesday, 9 May 2007

Actuaries raise concerns about private equity

There's a bit in today's Telegraph about Watson Wyatt's views on private equity as an asset class for pension funds to invest in. It's worth a read, although it does seem to repeat some fairly well-known points such as the need to identify the best funds, questionable outperformance compared to the public markets etc.

Perhaps more interesting is the question of the sustainability of the current binge:

Watson Wyatt said there was a danger that private equity could become a victim of its own success. More than $300bn (£151bn) of new money was raised by private equity funds last year. Finding a home for that money has forced private equity investors to test the market's limits, paying higher multiples of earnings for target companies and funding deals with ever greater debt.

1 comment:

ilanit said...

Los Angeles private equity firms borrow new money into existence in order to take these companies private. They inflate the money supply and syphon off huge sums as personal compensation. All the while, the cost of everything goes up as the value of a dollar goes down.