Private equity profits from market concerns
Private equity is likely to become a more popular way of raising capital funding as well-priced equity markets and uncertain bond markets force investors to look for alternative sources of funding, according to Minter Ellison partner Jeremy Blackshaw.
He said that private equity activity had been constrained by limited exit opportunities in the Australian market, which made it more difficult to recycle capital; however private equity providers were experiencing new opportunities.
“There has been a big uptick in the number of private equity funds lending to sophisticated investors and thus competing with the banks in the loan market,” Blackshaw said.
“At present this is only a small percentage of the market and it started before the global financial crisis and then halted during it, but it is now back on again.”
Blackshaw said the mid-market of $50 million to $250 million was the most active private equity sector globally. It continued to remain active as corporates held their cash amid concerns over protecting balance sheets.
This in turn has meant that private equity funds are facing less competition and lower prices for assets, and have been able to take advantage of these market conditions.
However in the Australian market banks are still willing to provide finance for proven performers, and leveraged deals are being refinanced on better terms than was being offered two to three years ago.
Recommended for you
Australian fund managers are actively seeking to launch Cayman versions of their funds to attract offshore flows, with Regal Partners set to launch its latest offering this month.
As private markets gain traction in Australia but only a limited pool of talent is available, three recruiters explore whether fund managers should consider looking overseas to find top talent.
With an explosion of private credit managers appearing in the market, two alternatives experts believe a consolidation is needed to maintain the quality of the sector.
Bentham Asset Management has become the latest fund manager to expand its distribution team as it reports increased interest in its credit strategies.
