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Private Equity - A Spent Force?

The Private Equity industry has grown hugely over the last 40 years and has generated massive returns for its Principals. As with any industry that is seen to be highly profitable, it has also seen a rapid growth in firms seeking to take advantage of continued investor interest in the sector. 

This, however, is leading to PE firms having to invest in higher risk businesses and accept more marginal returns. Is the model ripe for change?

The private equity model “is starting to look like a spent force” because more competition and record cash available is leading to lower returns as operators are forced to take on more risk, an adviser to the industry has said. Professor John Colley, associate dean at Warwick Business School, said the recent collapse of British carrier Monarch Airlines and the potential surrender of UK care homes operator Four Seasons to lenders exposed a weak model of ownership.

Tags

private equity, investment management, executive search, asset & wealth management

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