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Economic turmoil is bad for private equity firms - report

October 1
9:12 AM 2013

According to a report, private equity firms should ease up on purchasing assets at this time. Bloomberg earlier reported that higher interest rates had provided private equity firms an opportunity to acquire assets at seemingly good deals. Citing an example in Tactical Opportunities Fund, a fund set by Blackstone Group LP, the news agency had said that Blackstone and other investors had capitalized largely on the downturn in the economy. The USD1.5 billion fund by Blackstone was set up to purchase illiquid, underpriced assets.

The report said that most private equity firms would be in danger of purchasing assets that may not be liquid for the firms in the near futyre. Blackstone's President and Chief Operating Officer Tony James said, "A lot of investors are saying it's a good buying opportunity if that happens, we're a strong country, we'll get through it, and I'll make some money. But boy, it's got a lot of unpredictable long-term consequences."

According to the report, buying up assets at relatively cheap prices like what funds like Tac Ops would be doing. However, the report said that fund firms in practice would see that the benefits of acquiring cheap assets would outweigh the risks involved when the market fluctuates. This, in the end, would decrease the book value of the assets acquired, and in the process, would generate loss for funds like Tac Ops.

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