Private Equity Firms Remain Optimistic Despite Economic Downturn

Apr 25 2008 | 10:56am ET

Small- and mid-market private equity firms say that the U.S. economy is in a downturn, and that an extended period of market uncertainty would adversely impact p.e. firms. However, they remain optimistic about their own prospects and have generally set aggressive fundraising targets for 2008 and beyond.

According to a new survey of 323 managing principals of p.e. funds by Rothstein Kass, most respondents are doubtful of a quick turnaround, with nearly 70% believing the credit crisis will continue to worsen through 2008. But just about all surveyed expressed an interest in raising more assets for their funds.

“The ultimate success of any private equity firm is dependent on its access to capital and its ability to find suitable transactions,” said Steve Kass, co-managing principal of Rothstein Kass. “Because of the intense competition they face from larger players, investment banking operations and increasingly, from the alternative investment community, smaller and middle market firms are often among the first and most deeply impacted by prolonged weakness in credit markets.” 

Some 85% of those expecting a severe downturn think hedge funds will interfere with their efforts, while only 28% anticipating a mild downturn agree. Only 21% of respondents see more private equity funds being launched in 2008 and about 40% of managing principals expect traditional loans to replace private equity investments among young or struggling firms.

“Throughout their development, small and mid-market private equity firms have had to contend with competition from a variety of sources, including multi-billion dollar, global funds with strong brand recognition,” said Tom Angell, principal of the national commercial services group of Rothstein Kass.

“To effectively compete against the private equity behemoths, many middle market firms have been compelled to carve out practices in niche markets, often developing a level of specialization and expertise that surpasses that of larger counterparts.”


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.