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Private equity needs to act 'maturely': Report

Monday, 4 Nov 2013 | 4:00 AM ET
James Brey | E+ | Getty Images

The private equity industry is still struggling with its post-financial crisis image problem, and needs to emphasize its contribution to the economy and wider society and act "maturely", a new study has found.

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Private equity funds purchase and invest in companies that are privately owned, and were associated with the buyout boom of the mid-2000s. The largest private equity firms, based on capital raised, include Bain Capital, Goldman Sachs, The Carlyle Group, Kohlberg Kravis Roberts and The Blackstone Group.

In a report based on interviews with senior executives in the industry, Investec said that private equity had suffered from "image problems" since the financial crisis, and that failure to address these could provoke further regulation by authorities and have a negative impact on the industry's ability to raise funds, particularly from new sources of capital.

"It is clear from speaking with a number of prominent industry figures, that while buyout firms (companies that acquire other firms by purchasing a controlling percentage of their stock) have done a lot to prepare themselves for the new industry landscape, there is a lot more to be done before the winners and losers are determined and what the wider industry will look like as a result," said Simon Hamilton, head of Investec Fund Finance, in a report called "Investec Private Equity Insights 2013".

(Read more: Private equity loses out to mega-IPOs)

The executives surveyed said that buyout firms had to behave "more maturely", in order to distinguish the private equity industry from others sectors that were viewed poorly by regulators or the public.

"Questions are certainly being asked of the PE (private equity) industry, which needs to adapt to the post-crisis environment. There are calls for buyout firms to behave more maturely, in turn differentiating the PE industry from other areas with negative perceptions, such as hedge funds," said Investec.

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