Private equity – it’s a bubble, says CHAMP

While opportunities still abound in private equity, recent Australian buyouts have prompted one leading manager, CHAMP’s Joe Skrzynski, to label the current climate a “bubble”.

Skrzynski, a 20-year veteran of private equity for institutional investors, addressed the Russell Investment Group 20th anniversary client conference last week. Managers were not only spending too much on assets, they were spending the money they had raised too quickly, he said. And on the relatively high fees, including performance fees on top of a management fee (as with hedge funds), Skrzynski said the joke in the industry was that the performance fees were there so that “;the managers could pay their tax on the management fee”;. While PBL’s private equity financing deal has attracted most media interest, another deal, closer to the funds management industry, also raised eyebrows. Pacific Equity Partners, through its associate company Link, paid more than $200 million for Australian Administration Services from Telstra. This is about double the valuation placed on the company by potential trade buyers. Sally Collier, of Russell-associate hedge funds of funds manager Pantheon, told the conference that the private equity industry was evolving through the search for new investments. The industry was increasingly global and new markets in Europe and Asia Pacific were providing opportunities. Apart from geographical expansion, firms were also increasingly becoming involved in secondary buyouts, distressed companies and, in the technology field, clean tech venture deals, she said.