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Alternative Market Briefing

Private Equity may have run its way

Wednesday, December 19, 2018

Laxman Pai, Opalesque Asia:

Investing in private equity may have run its way in the current cycle with valuations having become very high and given the amount of dry powder waiting to be invested.

Daniel von Allmen, Chairman & CIO, Progressive Capital, said at a recent Opalesque Switzerland Roundtable in Zurich that as a value and contrarian investor he would not be interested in private equity at this point. "We are talking about more than a trillion dollars waiting to be deployed in private equity. The larger private equity investments are now valued at 14 times EBITDA, so this is definitely not a great time to buy private equity, I think. But if you talk to clients, they are not really attracted to hedge funds, neither to quants or trend followers, but they love private equity," he said.

"People tend to lose sight that assets move in cycles - we have always experienced cycles and we are just experiencing another one, being actually pretty close to the end of that cycle," he added.

Changing demand patterns

Cyclical investments will be causing issues when the cycle starts turning and private equity is cyclical as well, said Sebastian Schaefer, Managing Partner & Founder, Green Shoots Capital: "The visible demand patterns currently are actually supporting my thesis here. It's quite evident in the industry that there is demand for equity replacement, for fixed income replacement, and for more alternative allocations becaus......................

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