In this post, I am once again sketching a broad proposition to be developed, hopefully, in later posts. In sum, I believe there is room for corporate growth in conjunction - yes, in conjunction! - with alternative asset groups. Whereas multinationals already engage with Private Equity and hedge funds to fund start-ups/venture enterprises, I believe this is still largely confined to what (were) the Universal banks. [You know who I mean...]
PE, and to a lesser degree the hedge fund industry, is already topical in Europe and the US in the current business downturn. While activity is picking up, the figures [which I won't reproduce here) indicate that growth is nevertheless sclerotic. PE, and Bain Capital has taken a hiding, is blamed for all species of malversation and corporate job destruction.
In response, I contend that PE and other alternative asset providers such as hedge funds may provide an alternative road out of the global economic impasse. But yes, this would require alternative asset providers to situate themselves within a less "self-interested" bespoke model to enable corporate restructuring for growth.
My basic position is this:
- PE is growing in size with siginificant expansion in sectoral coverage. A recent Australian example concerns PE bids for Billabong and, infamously, the David Jones bidding hoax from a backdoor operation.
- Alternative assets are increasingly recognised as a legitimate asset class, delivering real risk-adjusted returns for investors with the capital to invest.
- Alternative assets afford significant scope for corporate growth.
- A bespoke model would deepen liquidity, advisory and asset protection services for MNCs as well as SMEs. PE and hedge funds can engage with agility in capital placement, capital raising, turnaround and distressed buying.
- If the private sector could incentivise reciprocity, then there may become less need or excuse for sovereign debtors to engage in quantitative easing and financial repression.
Instead of hating on business and, in particular, on alternative business, investors and stakeholders could draw on alternative business expertise to supply a CHEERING MECHANISM - as well as a clearing mechanism - for the private sphere. Adapting to a bespoke model, alternative asset providers are in a natural position to arbitrage inefficiency.
With proper execution, this proposition migh entail greater financial and real economic innovation and new potential for liberal markets.
..
I will try to decorate my "pie in the sky" with more detail in future posts.
A bientot!
Neil
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