Monday, February 2, 2009

Private Equity Funds - Winners and Losers in Today's Market

Now is an interesting time to look at Private Equity Funds and understanding their positions. Private Equity funds who haven't had their capital demolished or who are involved in projects with long term horizons and exit strategies will be in a position to benefit from the current environment.

Although many hedge funds who simply employed leverage to provide higher returns are probably wiped out, funds who either have a lot of cash or were recently created will essentially benefit from what essentially amounts to a 50% off sale in the market for companies who are valued at all time lows.

Unlike pure trading, PE firms will put their managers into the company and make changes to the companies strategy and actively participate in remaking the company into something more profitable.

Although major PE firms like OTPP, Omers and CPP are often in the news with stories such as the (now failed) BCE take over bid, the PE firms to look for are the smaller ones who take major positions in companies in the hopes of restructuring them to produce healthy exit multiples.

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