Economic Climate Fosters Potentially Lucrative Opportunities for Private Equity Funds
Distressed opportunities within private equity are heavily influenced by global economic conditions; the level and quality vary significantly during recessionary and growth periods. During the past year, significant opportunities, driven predominately by the credit crisis, have materialized across the private equity spectrum. These opportunities included buying distressed debt, bank loans, and real estate assets and securities, and providing financing to troubled companies. Sophisticated investors are fully aware of the flood of potential prospects that private equity funds have been offered and are actively looking to capitalize on these opportunities.
A multi-billion dollar fund of fund based in the U.S. is actively searching for seasoned investment teams at private equity funds. The firm believes that there is considerable opportunity in the distressed space, specifically in developed Europe and the United States. The firm feels that the economic crisis has cultivated more opportunity in highly developed and established consumer-driven economies rather than in newly or actively emerging nations. Though generally more comfortable with large institutional-sized funds, the firm is willing to consider much smaller distressed funds that are managed by notable and respected teams that are taking advantage of potentially lucrative opportunities.
A high net worth wealth advisor based in Dubai is actively evaluating distressed funds that are focused on G7 countries and investing in the small- to middle-market space. The firm believes that the seven largest industrialized nations will provide the most opportunities for fund managers, as these nations were generally the most affected by the severe economic downtown. The firm feels that private equity funds taking advantage of the opportunities created by the global economic crisis are poised to realize extraordinary returns, and the firm’s clients want to invest now.
As distressed funds continue to proliferate, opportunities within the distressed space will significantly decrease. Highly experienced management teams that got an early start will have a significant edge in terms of getting in front of institutional investors. Prospective investors are looking for seasoned private equity firms that are highly versed in their strategies and possess the proven ability to identify remarkable investment opportunities fostered by the global economic crisis.