It’s the scenario that Bank of England economist Andrew Haldane last year termed the Big Fish Small Pond problem — the prospect of rising global investor allocations swamping the relatively small emerging markets asset class.
Fear of many years of stagnation in the major western economies has everyone fretting about a repeat of the “lost decades” that Japan suffered after its banking and real estate bubble burst in the early 1990s. Indeed HSBC economists were recently keen to point out that U.S. per capita growth over the noughties was already actually weaker than either of Japan’s lost decades.
Watson Wyatt tells us the world’s largest fund managers lost $16 trillion of assets in 2008 as the worst of the global financial crisis took its toll on the top 500 global fund firms. The fall in assets is the largest since Watson Wyatt’s research began in 1996 and doesn’t even include the dog days of early 2009 when no one knew quite when the flood would abate.
Opportunistic buyers, lovingly dubbed "tourists" by those in the industry, have moved into the secondary private equity market. They're looking for positions in brand-name private equity funds at knock-down prices. As I wrote in a DealTalk today:"Pension funds and wealthy middle-east sovereign wealth funds are buying up investments in private equity funds, pushing up prices and sidelining secondary firms that specialise in acquiring the assets."The market for second-hand private equity assets -- where private equity investors offload assets to specialist buyers -- has mushroomed as the credit crisis has intensified. And increasing numbers of cash-strapped investors are concerned about meeting their future commitments to buyout funds."New investors have been attracted to deals by steep discounts to net asset value, forcing up prices for specialist buyers, such as Goldman Sachs (GS.N) and HarbourVest Partners (HVPE.AS) that last month closed secondary funds after reaching their $5.5 billion and $2.9 billion targets respectively."Read the full piece here.