London-based buyout firm Doughty Hanson’s decision to pull its planned €1 billion IPO on Euronext in October suggests there’s not much retail or high-net-worth demand for private equity when some commentators are already calling the top of the market. Kohlberg Kravis Roberts managed to raise $5 billion through its Euronext IPO earlier this year but Apollo subsequently struggled to raise $2 billion and both firms’ shares have been underwater since. At the beginning of October, KKR was trading at a 16% discount.
“I think other players have looked at those two events and said maybe these first two deals took most of the interest out of the market. Any other deals that come will be smaller scale,” says Peter Aliprantis, head of alternative investments for private banking in the US at Credit Suisse.
Individual investors should be cautious about timing. “Quite frankly, the private equity markets are pretty much fully invested,” says Aliprantis. Commitments for KKR’s new 2006 global fund, expected to be the largest buyout fund in the world, are set to close soon. With more private equity funds being raised in the private and public domain, competition is intense.
“Retail investors tend to display more lemming-like behaviour and often pile into a market right at its peak,” says Kelly DePonte, partner at San Francisco-based alternative investment firm Probitas Partners.