More than half the profits from some of the UK's biggest recent private equity deals were generated by high levels of debt, while less than a fifth came from operational improvements at the underlying companies.These are the findings, published on Wednesday, of the first annual report on the performance of private equity portfolio companies, compiled by the British Private Equity and Venture Capital Association (BVCA) in response to political pressure.The findings underline how private equity, which uses money from investors and loans from banks to buy companies, has been heavily reliant on debt to generate most of its profits from the biggest leveraged buy-outs in recent years.
These are the findings, published on Wednesday, of the first annual report on the performance of private equity portfolio companies, compiled by the British Private Equity and Venture Capital Association (BVCA) in response to political pressure.
The findings underline how private equity, which uses money from investors and loans from banks to buy companies, has been heavily reliant on debt to generate most of its profits from the biggest leveraged buy-outs in recent years.
Memory Lane | Bloomberg | 26 July 2007
First Rule of Fin: Debt is Good; Equity is Bad. Diversity is the key to economic and political evolution.
The bonuses weren't.
Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions.The record December figure, equivalent to about 10 per cent of industry assets, extends the run of outflows to four consecutive months and has increased the total net outflow for 2008 to $200bn.The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge.Conrad Gann, chief operating officer of TrimTabs, said he foresaw more redemptions in the first quarter of 2009."Approximately two-thirds of industry revenues comes from performance fees and we estimate that 81 per cent of hedge funds were underwater [reported negative returns] last year... Managers have half the assets to work with and remaining assets need to fully recover prior losses before they can earn performance fees." Many hedge funds have halted redemptions. Paying out large sums when markets are falling would damage remaining investors severely, they say. To meet investors' demands for their money back, the funds would have to sell their most liquid assets, usually equities, regardless of which are the best investments, the funds say.
The record December figure, equivalent to about 10 per cent of industry assets, extends the run of outflows to four consecutive months and has increased the total net outflow for 2008 to $200bn.
The size of the once lucrative industry has almost halved in the past year, to $1,000bn under management, according to data from TrimTabs Investment Research and Barclay Hedge.
Conrad Gann, chief operating officer of TrimTabs, said he foresaw more redemptions in the first quarter of 2009.
"Approximately two-thirds of industry revenues comes from performance fees and we estimate that 81 per cent of hedge funds were underwater [reported negative returns] last year... Managers have half the assets to work with and remaining assets need to fully recover prior losses before they can earn performance fees."
Many hedge funds have halted redemptions. Paying out large sums when markets are falling would damage remaining investors severely, they say. To meet investors' demands for their money back, the funds would have to sell their most liquid assets, usually equities, regardless of which are the best investments, the funds say.
