UK assets are over-priced compared with those in the US, according to Gerry Murphy, the London-based chairman of Blackstone’s international operations.
“We find it difficult to invest […] in this country at the moment,” Murphy told delegates at the Listed Private Equity Investor Conference 2017 in London on Thursday. “We think the market is very toppy, we’re very selective.”
The average price multiple for the UK and Ireland was 10.1x in the first three quarters of 2016, data from Clearwater International suggest, and rose steadily throughout the year.
Murphy pointed to the broader environment of high asset prices as having driven the emergence of longer-hold, lower-return and lower-risk investment opportunities, such as Blackstone’s “core funds”.
“If you think about it [high prices] mean buying perhaps better, more durable assets which are intrinsically less risky, and paying more for them,” he said.
“So I think you’ll see big private equity evolving its model, both in terms of its fee and cost structures, and its investment and return horizons, to reflect the market we operate in.”
Blackstone has started investing its first long-term private equity fund, Blackstone Core Equity Partners. In January, it struck its first deal, acquiring music rights organisation SESAC Holdings.
Asset valuations could be moderated by a future rise in interest rates, Murphy noted.
Blackstone had 81 portfolio companies globally with over $71 billion in combined annual revenue as of March 2017. The portfolio employs more than 524,000 people around the world.