Because they have different ownership structures than the large, stock market-listed firms that have collapsed recently, private equity funds may escape a similar fate, according to an article in the Financial Times. The big companies often had very little control over their trading desks, who were free to gamble other people’s money with little oversight or sanctions if they failed. In contrast, PE funds are typically structured as private partnerships. Fund managers also have “skin in the game,” often investing their own money side-by-side with investors and making key decisions themselves.
In the midst of the current financial crisis, though, many fund managers are reining in their leveraged positions and seeking safe havens for preserving capital. Fund managers are waiting for signals that the market has finally reached bottom. However, they are also adding to their shortlist of sectors and companies whose values have fallen to the point where they present attractive buying opportunities. All this bodes well long term for those looking for work in the hedge fund and private equity sector.
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