1st August 2012
The figure – around the entire value of companies quoted on the London Stock Exchange and some 20 per cent more than the FTSE100 constituents – comes as private equity impacts both the political arena and the investment world.
US president Obama has hit out at Republican opponent Mitt Romney for his activities at private equity house Bain Capital, where the presidential hopeful reputedly made many millions. Romney was the Bain CEO during the period when it was one of the most profitable private equity funds, claiming his experience running the fund will help him organise US national finances. Opponents believe there is no relationship between selective purchases, leveraging and selling of companies and the world's largest economy.
Additionally, and more importantly in the UK context – as more companies and other asset-backed situations go private, investors may be left with less choice and less information.
Pension funds drive private equity growth
The Prequin figures show that interest in private equity – buyouts, property portfolios, infrastructure assets, commodity funds and some hedge funds – has grown over the past year despite rocky investment conditions. This has been driven in part by pension funds needing to find investments paying more than bonds but without the short term implications of equities that can help meet their liabilities.
Craig Baker, global head of research at Towers Watson Investment, says: "The on-going global economic crisis has driven all types of institutional investors towards having more diversified investment portfolios, with investment managers offering significant alternatives capabilities being the clear beneficiaries. Notably, allocations to alternative assets now account for 20% of all pension fund assets globally, up from 5% fifteen years ago."
He adds: "Pension funds have always been and will remain a very large client group for top alternatives managers, but the demand from non-pension fund investors, such as sovereign wealth funds, is only going to increase in the future."