Alternative Assets

Drowning in Liquidity

New money is flooding private equity funds amid a dearth of new investments. Source: Reuters

The main thing about private equity is that it’s private – as in invisible. Virtually unknown to the public, these private equity funds now control a big share of the German economy, with investments in some 5,000 firms employing nearly 1 million workers and racking up sales of €179 billion, according to the German Private Equity and Venture Capital Association (BVK).

Even the names are impenetrable – EQT, KKR, Cinven, BC Partners, CVC, and Ardian, for example. But they are there, and getting bigger all the time. Seeking higher yields in a low interest-rate environment, German pension funds and insurance companies are rushing to fill the coffers of these private equity funds, even as the funds are still trying to find good investments for the cash already on hand.

A recent survey by BVK of investors who together manage more than €1 trillion found that nine out of 10 listed yield opportunities and diversification as the reasons to invest. Apollo Global Management, for instance, has already pulled in $24.7 billion in fresh capital, a record for them. Altogether, financial data firm Preqin estimates, private equity funds still have more than $600 billion available to invest.

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