Private Equity Investments how it works

Private Equity (PE) investment has increased dramatically in the last five years, and private equity funds have produced excellent returns for investors. Private equity funds are popular “alternative investments” and now fashionable that many large investors (high net worth families and institutional investors) seemed to be involved. Private equity funds to acquire looking for companies or businesses at a lower cost. They used to use a lot of deductible tax debt to their revenue, reduce costs to try to improve profitability in the short and long term, and to sell assets to take the capital. Sometimes they pay a dividend of assets of the company, and eventually sell (2-5 years later) to another buyer or take public limited company a higher valuation.

The conditions helped fuel the recent boom in private equity has changed dramatically in the past year. Future of private equity returns will be much lower than could have been in the past 5 years and very disappointing for many investors. I think the private equity peak was in 2006 and the first half of 2007. The private equity boom has been driven by very cheap debt, a bull market in stocks, a strong global economy, higher profit businesses, large capital inflows into private equity, Sarbanes / Oxley reporting rules for listed companies, and strong yields. Some of the leading private equity firm Blackstone, Carlyle Group, Kohlberg Kravis Roberts, Texas Pacific, Thomas H. Lee and Bain Capital Cerberus. But Still may private equity Tampa firms are paying good to investors.

Private equity historical returns:

Past large private equity funds are very good, more than market returns. According to Fortune magazine in the 10s to mid 2006 (probably the peak for PE) private equity returns average 11.4% versus 6.6% for the index SP500 stock market. In the longer term (20 years) results show that private equity investments returned a premium of 4% -5% in the equity markets. Of course, these higher yields are achieved with a significantly higher risk and an investment that will “lock” for many years.

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