Bosses of some of the world's largest private equity groups told the industry's annual get-together that their growth into alternative asset managers, investing in everything from credit to real estate, was necessary for their investors to beat the economic cycle.
Private equity, one of the alternative asset classes offering diversification from stocks and bonds, has traditionally been about leveraged buyouts - where the buyer funds the purchase price through borrowing, using the target company's assets as collateral.
But tighter financing conditions have restrained this kind of financial engineering and investors accustomed to double-digit percent returns in private equity have had to settle for outperforming public markets by only a few hundred basis points.
Financial industry titans, who have amassed vast fortunes by buying and selling companies, said the best opportunities now lay in cherry picking the offerings of major asset managers. "Buyouts, which is what people normally think of when they think of private equity, are going to be an increasingly small part of a more specialised product base available to the limited partner community," James Coulter, co-founder of TPG Capital LP, told the annual SuperReturn International conference in Berlin on Tuesday.
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