As banks get burned from financing billion-dollar buyouts and pension funds grow impatient with private equity’s endless thirst for capital, skepticism is growing louder over the industry’s performance — and whether some of their daredevil deals could result in disastrous losses for their financiers.
Call it a taper tantrum, times 10. Developing nations are reeling from the double whammy of Federal Reserve interest-rate hikes and China’s economic slowdown.
When the liquidity tide recedes, investors from sovereign wealth to billionaire family offices are getting even more impatient with hedge funds. They are discovering that a lot of these expensive money managers don’t really hedge, and the pivot toward private equity was the right decision after all.
When it comes to collecting debt from distressed companies, a wait-and-see attitude will only end up with investors losing everything. That’s especially true with China’s real estate developers.
After a record fundraising year, there are worries that private equity’s golden era is over.
First, there was China Evergrande Group’s liquidity crisis. Then, Fantasia Holdings Group Co. — a small real estate developer that no one cared about till this week — refused to repay $206 million bonds even though it had the money. Sit tight.