 |
||||||
| Friday, November 20, 2009 |
Contact Us
|
 RSS
|
|||||
|
|
| |
|||
|
||||||
|
||||||
|
|
ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
|
|
|
|
November 11, 2008 12:43 PM ET
Some say that the credit crisis has put an end to the golden age of private equity. But not Blackstone Group chief executive Stephen Schwarzman, who told investors and analysts today that PE firms are poised to outperform most other financial services firms. Typically, private equity firms rely heavily on leverage from banks. With credit evaporating, some have wondered if PE outfits will be hung out to dry. Not so, says Mr. Schwarzman. Speaking at the annual Merrill Lynch banking conference, he argued that private equity firms do particularly well during recessions. Take the 1990-91 recession, he said, when leverage was virtually nonexistent. Despite the lack of credit, the average PE firm registered returns of about 30%. Similar returns were seen during the most recent recession, from 2001 through 2004. “And where do we find ourselves today? We find ourselves in another recession, and we find remarkable investment opportunities,” Mr. Schwarzman said. According to data from PE research firm Preqin, the median return for buyout vehicles in 2001 was 28%, while top-quartile funds that year pulled in at least 44%. Similar data for 1991 showed the median buyout return at 25%, with the top quartile starting at about 35%. Preqin spokesman Tim Friedman said it’s difficult to predict what will happen in this market. But he noted that the lack of available credit will likely lead to a greater focus on “a hands-on operational approach to managing investments” and less on financial restructuring. Some experts think leverage will remain unavailable for years. Mr. Schwarzman said during his presentation that he believes the financial system will “return to normal lending patterns” by 2011. Like many PE firms, Blackstone seems to be hoarding assets. Mr. Schwarzman said it has about $1.1 billion in cash equivalents, $150 million in cash and $1.3 billion in liquid investments. He noted that 80% of the company’s PE portfolio is estimated to be at or above 2007 levels, and he repeatedly described Blackstone as “well financed.” That optimism was lost on other financial institutions, however. John Thain, CEO of Merrill Lynch, said during the banking conference that “we are going to be in a very difficult economic environment for a significant period of time,” likening the credit crisis to the Great Depression. The credit crisis also has some other PE firms rethinking their approach to leverage. Carlyle Group managing director Randal Quarles said yesterday that the use of leverage by homeowners and the financial sector was “completely unprecedented, and it is not sustainable.” The Treasury Department’s $700 billion bailout fund is designed to kick-start additional lending, but so far it has not had an appreciable effect, experts say.
|
|
|
|
CRAIN'S BENEFITS OUTLOOK 2009
SPECIAL REPORT
MOST POPULAR
|
MORE ANALYSIS
Crain Financial Group:
InvestmentNews |
Pensions & Investments |
Workforce Management
Copyright ©2009 Crain Communications Inc
All rights reserved.
Privacy Policy |
Terms & Conditions