Private equity funding on the rise
During the last five years, private equity funds have raised a record £2.4 trillion from investors looking to gain exposure to this alternative asset class. This rise in inflows has been the result of historically low interest rates, which has resulted in investors searching for higher yields outside traditional asset types, and also a wall of cheap debt that has buoyed the leveraged buyout industry.
Private Equity Investestment Trends
For retail investors, gaining access to the opaque world of private equity investment is possible via listed investment trusts and funds, which invest directly in unlisted companies or across a range of private equity funds. Many of those listed investment vehicles have traded on sizeable discounts to their net asset values since the financial crisis, when the asset class fell out of favour with investors. However, their popularity has risen since then, with the sector discount narrowing to an average 16.4% last year, compared with 60% in 2009, according to data from the Association of Investment Companies.
With record amounts of cash flooding into the asset class, competition for quality investments is also rising. The question is whether private equity fund managers are at risk of over-paying for assets or if investors can still gain access to private investments that stand a chance of generating sufficient returns to compensate for the illiquidity and higher risks associated with the asset class.
The right time to ask for private equity to aid business growth
We take the view that the omnipresent activities of private equity firms in the market place means that now is a great time for businesses to seek the growth funding they need for their business development and M&A strategies.
Source: Investors Chronicle
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