Investors big and small are steeling themselves for the day the Federal Reserve ends its easy money policy, known as QE3. How they and the markets will react to a new environment was a big topic at the Deutsche Bank Global Financial Services Conference in New York this week.
Deutsche Bank Co-Chairman Anshu Jain called the prospect of the withdrawal of liquidity "concerning," but BlackRock CEO Larry Fink was far more sanguine.
There is too much discussion of "when, and if, and how the Federal Reserve will change its policy," Fink said. He does not think it will matter, because the central bank will be measured in tapering its bond-buying, as it has been in selling other assets it accumulated during the financial crisis.
Fink's sentiment was echoed by John Eydenberg, Deutche Bank's global head of financial sponsors. He told CNBC that higher rates should not have a big impact on the private equity market for a number of reasons.
First, Eydenberg expects the surge in initial public offerings to continue through the year. That should allow PE firms to cash in on investments they have made over the past few years. If rates tick higher, he said, the appetite for new offerings should remain robust.
Second, even if rates rise a few percentage points, they will still be below average on a historical basis, Eydenberg said. So leveraged buyouts, or takeovers funded by high-yield debt, should make sense for a number of companies even if investors hit the pause button to assess rates' impact on the markets.
