Private Equity and Credit Crunch: Impact on Portfolio Management

PORTFOLIO
MANAGEMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Q1. (I). Private Equity and financial crisis.............................................................................3
(ii). Explain main business models in a private equity firm...................................................4
(iii). Is private equity responsible for credit crunch...............................................................5
(iv). To what extent private equity is affected from credit crunch of 2008............................6
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
The essay prepared helps to define what is private equity, its main business model
followed by the related firms. Private equity can be described as an secondary investment option
and consists of capital that is not registered on a public exchange platform it also includes
investment strategies such as Venture capital, Growth capital, leveraged buyout etc.. PE is
associated with investors and cash that can be invested directly in private organisations or
alternate option can be to get engaged in public sector related buyouts that at last result in de
listing of equities relating to public sector. The information collected under helps to find out
whether private equity is responsible towards credit crunch or not. The attempt performed below
helps to collect that would prove whether private equity firms have suffered from credit crunch
taken place in year 2008 or not.
Private equity, 2016
MAIN BODY
Q1. (I). Private Equity and financial crisis.
It can be explained as a secondary form of financing through private sector that are
distant from public markets. According to author (Mirzoyan, 2018) Private equity comprises of
investors which direct invest in private organisations or which get engaged in acquisition of
public firms, resultant in de listing of public assets. A private equity company can be defined as a
management enterprise that gets engaged in investment related activities and operations. It
supplies financial backup and proceed to invest in private equity of a organisation or newly set
up business with the help of various strategies that count investing as a main objective, growth
capital and venture capital.
Role of private equity can be identified so as to generate net income for its investors at
first preference. The goal can be achieved by acquiring smaller firms and then focus on adding
value in it and sell them at higher rate for generating more revenues. This procedure involves
higher rate of risk and uncertainty & would consume a time period of many years.
(Financial crisis, 2008)
Different kinds of equity that can be defined are:
Leveraged buyout: According to author (Jang, 2020) It takes place when a purchaser of a
organisation takes a certain amount of liability as part of acquisition. The buyer can make use of