Is the Smart PE Money All Heading for Europe?


February 10, 2014

One of the big debates when it comes to financial markets of any kind is always “where is the smart money headed.” In late 2013, we looked at whether the smart money was headed to the private equity (PE) marketplace.


While those holding the “smart money” have been keeping an eye on the PE industry for a while now, the enduring popularity of the PE markets as shown by the near record levels of capital raised in 2013 proves the smart money is still interested in the marketplace.


Towards the end of 2013 we also looked at why PE deals seemed to happen quicker in Europe throughout the year, while a blog featured on the Wall Street Journal’s Market Watch site in early January 2014 analyses whether the smart money is Europe bound in 2014, not just within the PE marketplace but in terms of publicly traded stocks and other markets.


It is no surprise that many analysts are stating that the smart money is Europe-bound. Indeed, much of the PE capital raised in Europe throughout 2013 stayed in Europe, while Asian funds increasingly looked to the West without crossing the Atlantic as they normally would. Fawad Razaqzada, of told Market Watch that early financial activity in Europe this year, and specifically market gains, “suggest the so-called ‘smart money’ may have already started crossing the Atlantic.”


Remember, this was an analysis based on a handful of days’ trading. What has happened in the time since has done nothing to suggest this will change. As usual with financial opinion there are widely differing viewpoints from across the sector, with Peter Garnry of Saxo Bank telling Market Watch, “The smart money bought European equities 1.5 years ago. The rally could easily continue, but the smart money is already hunting for the next train. I bet the really smart money is looking for an entry into selective emerging markets.”


Garnry certainly has a point, but Europe has certainly not performed so well that the PE or public markets can be said to have peaked, and the continent remains a focus for “smart money” despite the most lucrative emerging markets being found in Asia, Africa, and South America. This is likely because many investors and funds remain risk averse, and there is still a greater sense that those involved with European markets “know what they’re getting” in comparison to the uncertainties associated with emerging markets.

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