Astoundingly, and possibly incomprehensible to most, London based Private Equity Intelligence reported this month that Private Equity Funds raised the second highest level of annual funding in 2008. Approximately $1 Trillion of capital is currently ready to be deployed. Only a quarter of this was raised by large buy-out funds, though this amounts to $284.2 billion last year, about the size of Ireland's GDP. The rest was raised by funds with other focuses, such as real estate funds ($153.5 billion) and funds focused on SMEs, 217 funds raised money in this category, the most of any other. However, this news may seem counterintuitive to the news released today, that 50,000 jobs were lost in the U.S. in one day. Coping with the shock is likely on the mind of all of 50,000 newly minted unemployed. However, to fund managers with bulging war chests, the wait is on to discover the bottom. With asset prices falling, demand slumping, and credit inaccessible for most, fund managers are in a very comfortable position to deploy the tremendous amount of cash at their disposal at the plethora of deals not finding an investor right now. The difficult part is finding the bottom.
A report in the Globe and Mail today suggests that the worst of the economic turmoil may now have passed. The argument made by Allan Robinson is that Treasury yields have stabilized and have actually shown preliminary signs of rising (judge for yourself the significance of the the rise, but the decline seems to have stabilized...for now). This means that investors are looking to move their money from out of the wing of the Treasuries and into, likely, investment grade corporate bonds. This is significant because it means investors are beginning to trust the relative stability we are seeing right now.
