Private equity's golden era is over, says billionaire investor

The golden era of private equity is over, with many funds unable to exit their investments and investors seeing no returns, said Egyptian billionaire investor Nassef Sawiris in an interview with the Financial Times.

The report said that in the post-pandemic era, with trading activity and initial public offerings slowing, private equity funds hold large amounts of assets but struggle to find exits. Some investors even said, “I haven’t seen any returns in the past five or six years, nor have I received any cash back.”

Sawiris, one of the investors, was particularly critical of the increasing use of continuation funds – vehicles where private equity firms transfer assets from one fund to another they also control, rather than selling them to third parties or taking them public.

He called continuation funds “the biggest scam ever,” arguing that private equity firms use the excuse of being unable to sell businesses to justify further leveraging them.

Continuation funds have become increasingly popular in recent years, growing nearly 50 percent last year to a record US$76 billion (HK$592.8 billion), according to an report by investment bank Houlihan Lokey.

Sawiris also criticized the industry’s focus, saying that firms spend 90 percent of their time on fundraising and just 10 percent on managing portfolio companies.

STAFF REPORTER