The Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) corruption scandal has taken a toll on the Brazilian economy, the construction firms in particular. Petrobras has been alleged to pay excessively to a cartel of construction workers, with the excess funneled into the pockets of the local politicians and former company executives. Since the allegation, investigations have started at numerous ends and have led to a severe decline in reputation of the Brazilian state oil company.
The private equity industry's capacity for leveraged buyouts continues to decline. Here are some reasons for this trend: Monetizations of portfolio companies have been talking longer in recent years. That traps investors' capital, reducing capacity for redeployment in new funds or in some cases for recycling in existing funds.
Back when the Executive and Congress at least pretended not to abdicate all power to the Fed, one of the centerpiece programs designed to boost the housing market for the benefit of the poor (as opposed to letting Ben Bernanke make marginal US housing a rental industry owned by a handful of private equity firms and hedge funds), was Barack Obama's Home Affordable Modification Program (or HAMP), which attempted to prevent foreclosures by lowering distressed borrowers’ mortgage payments.
It might be time to take the alternative out of alternative investing strategies considering their tremendous growth over the past few years. Non-traditional investment assets under management now exceed US$6-trilllion globally after growing more than US$600-billion in 2013, and investors are only planning to increase that amount this year.
The financial crisis of 2008 was the impetus many investors required to look beyond the traditional asset classes of publicly-traded equities and bonds and into the world of alternative investments. Others, battered by the volatility in the stock market, chose to liquidate their equities in favour of significantly adding to their bond holdings.
With the world’s largest miners flocking to sell assets, cost cuts across the industry and a virtual drought in buyers, private equity funds may finally be tempted into a sector long seen as potentially lucrative but risky.
Industry veterans say the coming months will be a test of whether private equity funds can turn intentions into investments and become more than niche players in an industry that has traditionally relied on public markets for cash.
Inquiring minds are digging into a Fed white paper regarding The U.S. Housing Market: Current Conditions and Policy Considerations.
Here are a couple of key snips. The bold headings are mine.
Overriding Private Contract Rights
Blackstone Group LP, the biggest alternative-asset manager, is “scrambling” to invest more than US$10 billion in energy companies after the price of oil plunged, the firm’s president said.
“Our people are scrambling and trying to come up for air,” Tony James said on a call with reporters today discussing Blackstone’s fourth-quarter earnings. “Everything just got hammered at once. There’s clearly some very interesting values in the credit markets just buying debt at big discounts to face and getting equity-like returns.”