Fundamentals ‘positive’ for PE – van Eyk

The “positive fundamentals” for successful private equity (PE) deals are likely to remain in place over the next few years, according to van Eyk investment strategist Nigel Douglas.

Speaking at the van Eyk annual conference last week, Douglas said PE deals would benefit from the continued strength of the economy, including “high company profits, low debt funding costs and responsible borrowing by private equity acquirers”.

He was part of a panel discussion on PE that also featured Les Fallick, managing director of Principle Advisory Services, and John Brakey, head of PE and alternative investment at Macquarie Funds Management.

Commenting on the current high profile of the PE sector, Brakey said both the scale and impact of the industry has been “blown out of proportion”, adding that the “current excess of deals was a phenomenon that would pass”.

“To put things into perspective, a $1 move in the share price of Telstra is equal to a third of total private equity invested in Australia over the past 12 months,” he said.

Fallick argued that investment in private equity products is not always suitable to retail investors. “Private equity investment tends to better suit large wholesale investors who can handle the illiquidity,” he said.