Opportunities in Financials
There has recently been increasing opportunity for private equity funds focused on the financial sector. The failure of several large investment firms and the merging of several others, has created space for newcomers with innovative ideas. The relative weakness of some of the larger firms has opened the door for private equity funds. This sentiment has been echoed through conversations Brighton House Associates’ analysts have had with investors.
Since the start of February 16 private equity investors mentioned financials as a sector they would like to see exposure to in a private equity offering, and so far in 2009, 15 percent of all private equity investors indicated a similar interest. Two examples of investors looking to evaluate funds with exposure to financials include a large institutional investor who is emphasizing opportunities from private equity funds focused on global financial services firms.
This group sees potential for returns from distressed and turnaround situations at financial companies. Another investor, a California-based wealth advisory firm, mentioned its current interest in venture capital funds targeting companies in the financial sector.
The group seeks funds that take advantage of displaced human capital and entrepreneurial spirit. The firm sees potential for an internal rate of return of 15 to 20 percent from this type of an investment.
The interest of investors seems to suggest a willingness to invest in these types of products within a short time period. This may be due to the current market conditions or a general sense that the timing for these types of investments may be at hand.