The global economic crisis has churned up the private equity world, not only for PE firms but also for the primary investors in the asset class. A recent Wall Street Journal article looked at how a ranking of the most influential European private equity investors reveals a seismic shift in power, now that private equity funds are no longer oversubscribed and investors can be pickier about their investments.
The industry in general still has broad appeal, given its ability to deliver above-average annual returns. Some major investors have actually boosted their allocations to it. However, the credit crunch and fall in asset values means that the rate at which private equity firms have been able to exit their portfolio investments has slumped since its peak in 2006-2007.
“The losses experienced in the industry have not been as extreme as those suffered in other asset classes,” said Vincent Gombault, managing director of funds of funds at Axa Private Equity. “Of course, given the conditions in the market, many private equity companies are waiting for the right time to put their money to work. While some investors are impatient, many understand and support the need to wait for the most apposite time to invest.”
Entrepreneurs who’ve set up shop in China see plenty of potential for growth and say the current economic slowdown has actually helped the situation by reducing costs and weeding out weaker competitors.
In a PC World article, William Bao Bean, a partner at venture capital firm Softbank China & India Holdings, sees “a time of huge opportunity” in China. Bean is also a director at the language-learning startup iTalki, which enables users in 200 countries to take language lessons and exchange lessons with other users, in more than 100 languages.
“The good thing about this market is that it is a really bad economy and people are looking for ways to work. We’ve had 1,100 teachers sign up on our platform in the first month,” Bean is quoted as saying. China gives iTalki a significant cost advantage over rivals in other countries. “We have a very low cost base to begin with and then we’ve managed to further lower it. We think we’re one-tenth to one-twentieth their running costs,” he said.
The Abu Dhabi Investment Company (ADIC), the first investment company in the United Arab Emirates and one of the leading financial services firms in the area, has hired a new head of private equity to lead the charge for buy-outs in the Middle East and North Africa.
Because of the credit crunch, the value of buy-outs globally sank last year. But Nazem Fawwaz Al Kudsi, CEO of ADIC, says potential deals are starting to emerge in the region’s deepest markets, the U.A.E., Saudi Arabia, Turkey and Egypt, according to a report by Zawya, a Middle Eastern business information newswire.
“The family-run firms that dominate the region are hungry for capital and expertise, to help them make their operations more efficient, and to expand their businesses across the region,” Al Kudsi said.
