Private equity — greater stability for institutional portfolios

Private equity investments can generate stable cash flows through entrepreneurial value creation even in a volatile environment. In this way, they make their investors less dependent on the mood swings of the securities markets, which are difficult to predict. With a limited risk budget, sub-segments such as mezzanine and infrastructure in particular offer attractive opportunities. The selection of the most promising funds and compliance with regulatory requirements should be entrusted to a professional investment manager.

Based on unresolved debt problems in Europe and the USA, a renewed global economic slowdown has caused unrest on the financial markets. The low interest rate policy in most industrialized countries and the uncertain outlook on the stock market make it difficult for institutional investors to achieve their return targets with an appropriate risk budget. More than ever, therefore, there is a need for investment forms that enable stable and attractive returns even in difficult market phases.

Against this backdrop, private equity funds offer an interesting prospect, as they have proven in the past their ability to operate successfully despite a weak economy. While a ten-year investment in European equities was a losing proposition as of the end of 2010, European buyouts had an average annual return of around 14 percent over the same period. This success is primarily attributable to the ability of private equity funds to secure the value of their investments even in a difficult environment through classic entrepreneurial action. When circumstances require it, an experienced fund management will react quickly and flexibly, reduce costs, implement restructurings and take all necessary measures to secure the financing of its company. Solid work on the company reduces the risks of the investment: In the coming years, successful private equity transactions will therefore be characterized primarily by operational value creation, stable cash flows and a high equity ratio.