Feb 13 2012

Pension Funds Seek Yield, Look To Private Equity

Pension funds are searching for yield in a low-yield environment.  It’s a tough task for sure.  However, many are turning to private equity.  Private equity funds offer the potential for much higher yields…a necessity to close the gap between the yield pension funds are currently getting and the yield they need to meet their goals.  While many pension funds already allocate a small percentage to private equity, most of these pension funds have already increased or are considering increasing their private equity allocation.

While this is good news for the private equity industry, it is even better news for business owners looking to sell.  Simply put…there is more money chasing fewer businesses.  It is basic supply and demand.  And the better news is that the current low-yield environment looks like it is here to stay…at least for 2 or 3 more years.

More money to invest, and lower acceptable yields, mean private equity can afford to pay more for privately-held businesses.  Business owners would be wise to take advantage of these circumstances while they last.