The financial crisis in 2008 led into a number of changes in the financial sector. One of the biggest changes had been in regards of tightened regulations amongst banks’ private equity activity. Although there has been clearer separation of the two, with some banks getting rid off much of their private equity assets, some banks continue to have a firm grip in the industry.
Bloomberg reported on Tuesday that Credit Agricole Private Banking is expecting a steady rise on private equity investments. The bank announced it believes the investments will double in the next few years, with wealthy clients providing as much as $5 billion in private equity.
The Rise of Private Markets
The global head of private equity at Credit Agricole Private Banking, Olivier Carcy, told the newspaper, “Private markets – including private equity, but also real estate and private debt – are starting to be a very important asset class”.
The interest to private markets is mainly driven by the quest for more stability. The stock markets have proven to be very volatile in the past and the current situation doesn’t look much better. The conflicts in Ukraine as well as the Middle East continue to worry many investors and private equity is seen as a more stable option. Experts believe the private markets can currently benefit from slow economic growth.
Furthermore, Europe is currently a lucrative market for private equity deals. According to Carcy, the slow economic growth in the region has helped provide cheap credit and “the only way to grow is to buy other companies”, creating a flurry of opportunities for investors.
Credit Agricole Private Banking
The equity allocations in the bank are currently mainly focused on third-party funds. Nearly 75% are invested through these funds, while the remaining is still done through direct investments.
Bloomberg’s report shows the bank is looking to invest between $400 and $500 million in private equity deals in 2015. The aim is to provide its current clients a return of $300 million, while it is set to sell off its previous transactions. In the previous years between 2001 and 2014, the investors in private equity achieved an average return of 11% a year. Last year, the return was an impressive 25%. According to the reports, the bank is expected to let go of its stake in up to 50 companies in Europe, with further 20 companies in the US.
Positive Mood Even Among Banks
Credit Agricole Private Banking’s attitude towards private equity investments is shared by many other banking organisation. Furthermore, there is a more positive mood amongst banks even when it comes to the tightened regulations. The Independent reported recently how the Deutsche Bank chief, Anshu Jain, told at the World Economic Forum that, “The bulk of regulatory reform was much needed,” and banks are, in fact, better off due to the new rules.
Yet, many banking organisations still need to figure out how to organise themselves as the deadline for certain regulatory rules gets closer. But this means that many assets will become available in the market, and that is going to be lucrative news for many private equity firms.
You can find interesting deals in the world of private equity at DealMarket.
Question: Are banking institutions still big players in the private equity sector?
Tags: dealmarket, europe, funds, investment trends, PE trends, private equity, Private Equity Law, private equity trends