The private equity industry has indeed sunk if it is being compared with the Beatles’ Yellow Submarine. 

Asked at Dow Jones’ Limited Partners conference to come up with a theme song for the industry, Nick Ashmore, head of private equity at the National Pensions Reserve Fund in Dublin, reeled off an imaginative few suggestions including: 

Yellow Submarine ; nominated for all the funds underwater; and “Hotel California”, dedicated to all the real estate funds where investors could check out but never leave.

Ashmore told investors at the conference he had “sensible” expectations about returns from buyout deals done at the top of the boom, particularly from the bubble period of early 2006 to mid-2007. “We don’t expect them to generate massive returns.”

He has “very high expectations for capital we have committed but not deployed” but doesn’t see himself deploying much cash this year to the asset class.

“If we do any commitments at all this year it will be very modest and probably be around distressed,” Ashmore said.

Moreover, investors — known as LPs — aren’t working together to push for better terms.

“Terms have long been a difficult area, because LPs don’t coordinate or work together to apply the right degree of pressure… to achieve the changes,” he said.

It ends up being “potluck when you do apply pressure on terms”, he said.

Opponents seeking to slow down Chrysler’s blitz through bankruptcy court received unexpected support for their argument on Wednesday: Chrysler’s lead attorneys. 
    An email that turned up during discovery showed that Jones Day attorneys tried to discourage the U.S. government from setting a June 15 deadline for completing a sale of most of the automaker’s assets to a group led by Fiat.
    A lawyer for a group of Indiana pension funds, which oppose the sale, read the email in court which showed Jones Day attorneys said the tight schedule would undermine the credibility of their case, called the time frame a mistake and said it would “stuff the judge” by forcing such a rapid hearing schedule.
    “The debtor lost that one,” said the Indiana fund’s attorney, Glenn Kurtz of White and Case, referring to Jones Day recommendation regarding the deadline.
    Judge Arthur Gonzalez overruled Jones Day attorneys who objected to entering the email, which the U.S. Treasury released during discovery, because it was not meant to be public and tapped into Chrysler’s legal strategy.

-By Tom Hals and Emily Chasan

First Reserve is sitting on another $9 billion of spending money for energy deals after finishing raising its latest buyout fund, Fund XII. The private equity giant, which specialises in energy investments, said the fund is the largest ever raised in the energy sector and exceeds its previous fund, Fund XI, which raised $7.8 billion in 2006. 

The fund appears to be lower than target, however. London-based private equity intelligence firm Preqin said in a recent report that the fund had a $12 billion target.

“Energy remains a large, dynamic and complex industry where change creates new, attractive investment opportunities,” said William Macaulay, Chief Executive Officer of First Reserve in the press release (below).

Private equity firms have been struggling to raise new money for funds as the pension and endowment funds that invest in them have been hit by slides in the equity markets.

Some sectors and funds have been more successful than others. Secondary firms, which typically buy investors’ positions in buyout funds at a discount, have been particularly successful at raising capital.

Fund XII Final

There seems to be an endless wave of bad news hitting the hedge fund industry at the moment -- gates and suspensions, record poor performance, the Bernard Madoff scandal and so forth -- but there are still one or two reasons to be positive.

According to a survey of institutional investors by alternative assets data group Preqin, conducted in January (and therefore after the alleged Madoff fraud came to light), only 8 percent said they were no longer confident about hedge funds and would reduce investments.

By contrast, 26 percent said they would be increasing their allocations this year.

This appears to be a more positive picture than for high net worth individuals, who, according to some anecdotal evidence, have become more cautious on hedge funds.

Institutions such as pension funds, in contrast, tend to have time horizons running into decades, so a year of bad performance is not necessarily the be all and end all.

They have also seen equities, which constitute a far greater portion of their portfolios, plummet last year, leaving hedge funds, relatively speaking at least, looking quite good.

Having followed wealthy individuals into hedge funds and helped fuel the industry's massive growth of recent years, they could end up supporting it through the difficult times.

But the survey also highlights some less appealing trends for hedge fund managers.

The industry's lucrative 2 and 20 fee structure looks more and more under threat, with around 35 percent of institutional investors saying they felt more confident to negotiate fees.

And some investors in the survey said they would no longer invest in funds of funds because they didn't think they were value for money.

For a section of the industry already under pressure -- for performing even worse than single-manager funds, after a huge rise in the dollar hit cash reserves and because some fund selectors failed to spot Madoff -- this is yet another ominous sign.