Does Private Equity Beat the Market?

A recent Wall Street Journal article addresses reader comments regarding the uptick in the cash balances held by private equity firms. Below are samples of reader questions and corresponding WSJ responses: Are these companies keeping cash in the bank and then borrowing to fund acquisitions? A bit of both, says WSJ. Private-equity funds, it says, use “lots of debt, or leverage, on top of their equity when they buy a company. This boosts the returns… Read More

For Hedge Funds, Being Like Buffett Isn’t Easy

While Warren Buffett’s track record is appealing to large private equity firms, his buy-and-hold strategy (averaging 10-20 years rather than the hedge fund industry norm of 3-5 years) can be hard for many to adopt, according to a recent Bloomberg article. “To play,” the article says, “they would need to give themselves lots of time—decades, in fact—and as near-to-permanent capital as they could muster. Ambitious buyout firms bet that by raising long-duration funds, they would finally… Read More

Rising Leveraged Debt a Worry

The number of leveraged loans (lending agreements with the most indebted companies in the U.S. and Europe) is high, according to The Wall Street Journal, a “development that investors worry could pressure financial markets if the global economic expansion starts to fade.” SBC Global Market Intelligence data shows that volume for leveraged loans is up 53% this year in the U.S. and is on track to beat the 2007 record of $534 billion. Even though… Read More

OSAM: Microcaps A Better Opportunity Than PE

Over the past decade or so, investors — particularly institutional investors — have focused more and more on private equity as a way to get exposure to small, potentially high-growth companies. But in a recent research paper, O’Shaughnessy Asset Management’s Chris Meredith and Patrick O’Shaughnessy explain why microcap equities in many cases are a more attractive alternative to private equity.