Last Updated: 12:01am BST 29/05/2007
The private equity party
There are ways to get a piece of the action. One of the simplest - and until recently overlooked - is via private equity investment trusts. The beauty of these is that you do not have to invest big stakes, and they have trumped most investment trusts over the past decade. Most of these trusts invest directly in unquoted companies, but some are funds-of-funds with a portfolio of other investment trusts and private equity funds
But these trusts are not the only route to private equity. Two months ago Barclays Global Investors launched the first private equity exchange traded fund, which tracks the S&P Private Equity Index, while several venture capital trusts invest in the asset class too.
Private equity is not a way to make a quick buck. Most private equity funds have a five-year lag before any investment is realised. And, as with any asset class, it is cyclical. Some of the returns have been substantial of late and, while the economy remains stable, experts believe there is no reason for concern. But should the climate change for the worse, some private equity transactions could come under pressure.
A reasonably balanced article, once you read the last couple of paragraphs. I toyed with the idea of putting some money in a private equity trust, but they look incredibly vulnerable to a recession or credit crunch. It seems that private equity funds are investing/buying companies just because they need somewhere to put their money, rather than because they believe they represent good value.
Will private ownership make large companies more or less resilient than their public counterparts in a recession? They'll probably be more willing to lay off staff, that's for sure.
