Private equity continues to dominate the investment headlines

Private equity continues to be in the news with ever bigger deals. Freescale, a semiconductor business, yesterday priced almost $6bn of High Yield bonds (the largest deal ever) to help finance the $19bn acquisition. The group of private equity firms wrote an equity cheque for $7bn which demonstrates just how much money they have been raising if they can invest that amount on one deal. Will it continue?

In a word, yes. Private equity has continued to raise cash and only earns a fee when it is invested. They can take advantage of the liquidity in the loan and bond markets to arbitrage the fact that bond yields are lower than earnings yields.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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