Tuesday, December 12, 2006

Smaller deals in Private Equity Sigh..

Private Equity: The Challenges Ahead

In private equity, the best returns have historically gone to a relatively small group of firms. "All studies show that the top quartile of private equity funds outperform the market. But other than that, they don't necessarily outperform the public market. It's a question of how good your private equity manager is," says Jim Leach, head of the $6 billion in-house private equity fund at the $96 billion Ontario Teachers Pension Plan.

During the last year, "mega" funds such as KKR, Carlyle, Blackstone, and Texas Pacific have enjoyed gains of 40% or more, according to one private equity executive who declined to be identified. The same executive said it was inevitable that returns for "mega" funds would head somewhat lower over the next year or so.

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