Fundraising Special: A risky business

More than five years into the financial crisis that has claimed banks and insurers for its victims, as well as private equity firms, pension funds and asset managers that poured capital into the safest havens to protect from further shocks and falls, are looking for higher-returning investments that can bolster their lacklustre portfolios, held back by low yields from fixed income.

Equity markets have soared to levels not seen since the start of the financial crisis, despite persistent concerns about the future of the euro zone and the fiscal health of many developed economies. The Dow Jones index reached an all-time high in early March, just days after US President Barack Obama signed into effect stinging budget cuts, and the FTSE 100 followed suit by hitting its highest level since the start of 2008.

Adding to the growing sense of optimism, the VIX, an S&P 500 volatility index that is sometimes referred to as ‘the fear gauge’, has fallen to its lowest levels since the start of the financial crisis – around 12 points at press time, compared with over 80 points at its peak in late 2008. Many in the private equity industry – particularly within the 

457.gifRisk is back on the table more so now than it has been in the last few years458.gif 

Jeff Eaton, Eaton Partners 

advisory community – are interpreting these figures as proof that investors want more risk. And they believe this can have a beneficial impact on the amount of capital flowing into the buyouts business. 

“By no means are we anywhere [near] back to the risk appetite people had five or six years ago; but risk is back on the table more so now than it has been in the last few years,” says Jeff Eaton, partner at placement agent Eaton Partners.