Five reasons to remain cheerful about the private-equity boom

Is the flotation of asset managers such as Fortress and Blackstone a sign that we've reached the top of the market? Unlikely - this is no 'Netscape' moment, says Simon Nixon.

I first wrote in this column about the money to be made from investing in listed hedge funds and private-equity firms in January. Then there were just a handful of these so-called alternative asset managers, all listed in London, and I thought they looked cheap. Businesses such as Bluebay and Ashmore were growing their earnings at 40%-plus per year, yet were valued at about 15 times current year earnings. This looked to me like dotcom growth at old economy prices and so it has proved.

Since then, the share prices of Bluebay and Ashmore have almost doubled and the dotcom analogy has started to take a more alarming turn. The flotation of US asset manager Fortress in February was described as the hedge-fund industry's "Netscape moment", recalling the initial public offering of the internet browser in 1995 that marked the start of the dotcom bubble. Since then, the $30bn Blackstone float in June and the planned listing later this year of KKR, Och Ziff, Citadel and GLG have added to fears of a new dotcom-style frenzy. If the insiders are all looking to cash out, surely it's a sign we've reached the top of the market?

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Simon Nixon

Simon is the chief leader writer and columnist at The Times and previous to that, he was at The Wall Street Journal for 9 years as the chief European commentator. Simon also wrote for Reuters Breakingviews as the Executive Editor earlier in his career. Simon covers personal finance topics such as property, the economy and other areas for example stockmarkets and funds.