Private Equity
Posted: Wed 18. May 2011, 13:18
Private Equity
In addition to the housing bubble, financial derivatives and hedge funds thrived another phenomenon: private equity.
The term first said that businesses and assets are held of a private group .They are not stocknoted.They collect private money in the form of equity capital to purchase assets, including listed companies.
The policy of easy money by central banks has also leeds into massive excesses .The wonderful returns of the first private equity deals ever moved more capital into the trades.Already 2003, investments in smaller denominations were retailed to private investors .With this expands the entrance options opened massively, so now everyone could get involved.When a business knows his business really, it has no problems to come in capital from major investors .The world really is not lacking on capital... ...
Over the years, the deals were always more risky.In 2006,in the world more than 650 billion dollars were investet in debt-financed acquisitions .The shareholders' equity is often only 20% of the transaction amount so-called locusts .The tactic of so called locusts is not to deny here ....
The massive rise of private equity deals is the result of cheap money, small time horizons and risk preferences of the larger PE associations.As long interest rates were low,they could make good profits in the industry functions. What in a low interest rates phase works may soon be over at a time of rising interest rates ...
The only plus point of the destruction of capital is based on the fact that the landing fees of most private equity firms are subject long-as it is also at closed fonds .So, investors feel on the paper even longer as the owner of an asset, even if it is already worthless .They limit eventually their consumption, panic reactions are avoided, in contrast to the stock or real estate markets.The air escapes slowly and hardly noticed but surely out from the private equity bubble ... ...
love and light
pyra
In addition to the housing bubble, financial derivatives and hedge funds thrived another phenomenon: private equity.
The term first said that businesses and assets are held of a private group .They are not stocknoted.They collect private money in the form of equity capital to purchase assets, including listed companies.
The policy of easy money by central banks has also leeds into massive excesses .The wonderful returns of the first private equity deals ever moved more capital into the trades.Already 2003, investments in smaller denominations were retailed to private investors .With this expands the entrance options opened massively, so now everyone could get involved.When a business knows his business really, it has no problems to come in capital from major investors .The world really is not lacking on capital... ...
Over the years, the deals were always more risky.In 2006,in the world more than 650 billion dollars were investet in debt-financed acquisitions .The shareholders' equity is often only 20% of the transaction amount so-called locusts .The tactic of so called locusts is not to deny here ....
The massive rise of private equity deals is the result of cheap money, small time horizons and risk preferences of the larger PE associations.As long interest rates were low,they could make good profits in the industry functions. What in a low interest rates phase works may soon be over at a time of rising interest rates ...
The only plus point of the destruction of capital is based on the fact that the landing fees of most private equity firms are subject long-as it is also at closed fonds .So, investors feel on the paper even longer as the owner of an asset, even if it is already worthless .They limit eventually their consumption, panic reactions are avoided, in contrast to the stock or real estate markets.The air escapes slowly and hardly noticed but surely out from the private equity bubble ... ...
love and light
pyra