Private Equity Firms are Skeptical About 2009 Recovery

According to a survey conducted by Rothstein Kass in May 2009, private equity industry is skeptical about current market rally. Based on survey, more than 90% of middle-market private equity fund managers believe that the credit crisis will last into next year. Despite that pessimism, most firms hope to raise capital this year and plan to take a more active role in running their portfolio companies to combat the weak economy. More specifically, 83% of respondents expect new investors to enter the market, though not to the exclusion of high net-worth investors, from whom 77% of those surveyed expect to see new money. By contrast, only 43% expect institutional investors as a major source of new capital. Also, Rothstein’s survey shows that most private equity managers don’t expect a recovery until the middle of next year. Managers are looking for ways to improve the returns of their portfolio companies. Nearly four in five expect to have greater involvement there, up from 63% last year. A second Rothstein Kass survey of ultra-high net-worth investors finds that only 24% are highly satisfied with their current private equity investments. This shows that investors are worried about private equity firm’s returns and expect a prolonged period of economic weakness.

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