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August 11, 2008

Private Equity Update

Banks have been in fashion for some time now.  A rare thing.  Papers are filled with glamourous headlines announcing the latest billion dollar "
Writedown" or "Loss".   A year ago it was billion dollar "Deals".  It would seem that the bank's cousin, private equity funds, is also suffering from the same bad press.  Many in the newspaper business are assuming that because of the lack of credit, private equity is at a stand-still, licking its wounds from failed projects. This is not true.  
Private Equity's strength is its versatility.  As the banks began shutting the door to LBOs in late 2007 and selling debt at a discount to shore-up some cash, private equity funds abruptly changed course and bought much of that debt, and continues to do so today.  
Currently, some of the most activity is focused on infrastructure.  Around the globe, 71 funds are raising US$90.8 billion to invest specifically in infrastructure, a particularly stable investment with steady cash flows.  Private equity professionals are looking to outmaneuver any market volatility by preparing to support the CAD$150-billion that must be invested over the next 20 years to meet Canada's growing demand for electricity.  
It would seem, then, that the industry of private equity is never so much under attack as it is remobilizing and assessing new fronts of opportunity.  The only thing that is permanent now for these bankers and fund managers is having to cope with being splashed all over the front pages.  If David Rubenstein is any indication, it seems they will be able to adjust to this as well.
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