Tremendous growth in Private Capital Markets

Folks,

Over the past several months I have noticed that there are more than 2000 PE funds and several hundred Mezzanine funds and private Debt funds in US. (I am keeping aside the VCs and Venture Debt funds). And even hedge funds have started indulging in some principal investing activities.

I wonder if we really have so much capacity in US for so many capital providers.

1) Where are the investment opportunities going to come from ?
2) Isn't this going to push up the entry valuation as more firms compete for the same deal ?
3) If entry valuations are going to go up then returns will be down and hence several funds will be pushed out of the market. Isn't it ?
4) These firms will have no option but to expand overseas (china, India, Brazil) and look for investment opportunities there. Perhaps this has been happening for a some time.
5) Significant portion of Due diligence process will be outsourced to China, India etc ?

I do realize that I have asked too many questions. But would like to know the views of market participants on these areas.

Comments (2)

 
Jul 25, 2011 - 4:30pm

I'm surprised, I thought the private equity bubble has passed now, and that the industry is stagnant. To my knowledge, many PE shops aren't sourcing or investing as of late and are simply managing their portfolio companies (or planning for an early exit). One of my friends, an MD at a boutique, says her shop only made two significant deals this past year.

I know that as of now, the demand for private equity capital are coming from divested companies or small public companies wanting to go private.

Anyone familiar with emerging market trends w/ respect to PE?

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