Private equity companies will go to sovereign wealth funds (SWFs) for their investment money and not bother about banks, Guy Hands, boss of private equity firm Terra Firma, told the ‘Super Return’ conference in Munich last week.
Three months ago Hands called bankers running for cover in the wake of the credit crunch ‘whimpering dogs’. Bankers, said Hands, ‘hunted as a pack’, ‘pursued easy prey’, ‘when they get hit, they whimper’, and ‘they won’t come out of their baskets easily’.
Last week he was saying that Wall Street and the City of London could be ‘out of the picture’, with bodies such as the Abu Dhabi Investment Authority, the world’s biggest SWF, effectively replacing Wall Street and the City as providers of investment funds to the private equity industry.
According to Hands, while the sovereign wealth funs are into providing debt funding in £1-£2bn tranches, the banks were not going higher than £500m apiece.
Another speaker reckoned that only 20 per cent of US LBO investment was held by US banks.
A Blackstone speaker at the conference said Blackstone is also looking to non-bank funding sources, but a JPMorgan Chase speaker thought that was an unrealistic approach.
Other speakers took a different tack, suggesting that the threat of the SWFs was not to the traditional role of the banks, but to the private equity funds themselves.
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