Private equity may become a ‘pyramid scheme’, warns Danish pension fund | Financial Times
Tendency for buyout groups to sell companies to themselves and peers is ‘not good business’, ATP executive says
✒ Some quotes of Mikkel Svenstrup, chief investment officer at ATP (a major investors in private equity funds) in view of the trend that buyout groups are increasingly selling companies to “continuation funds” (different funds that is also under the control of the same private equity group, aka themselves) and to peers:
- “This is the start of, I am saying potentially, a pyramid scheme.”
- “Everybody’s selling to each other… banks are lending against it.”
- “The exponential growth of the private equity industry in recent years, as investors have poured cash into its funds, would stop at some point… this is just a question of time.”
- It’s not that I think the private equity market is going to drop off a cliff, we are just going to be looking at potentially low returns and high costs.”
- Obviously we’ve been looking very carefully at… who’s been tweaking returns figures by using bridge financing, leveraged funds… all those kind of tricks they do to kind of manipulate the IRR.”