* Tech, healthcare, cleantech popular for new investments
* Fund managers expect higher deal prices this year
* Pressure on fees for private equity funds expected
By Megan Davies
NEW YORK, May 18 Private equity firms are
concerned about an investment bubble occurring in the green
energy sector, among other hot industries, a survey of more
than 200 fund managers said.
The recent credit crisis has made investors cautious and
more aware of risks that can arise from crowded investment
positions, according to the survey, carried out by tax and
accounting services firm Rothstein Kass and released on
Green energy is the sector most likely to produce the next
investment bubble, the survey said, with 24 percent of those
surveyed highlighting it. Commodities was the second most
likely, followed by gold and then financial services.
The respondents answered the questions in January, prior to
recent falls in the gold price. The metal, as of Tuesday, is
about $100 below its record highs above $1,575 an ounce set
earlier this month. [ID:nLDE74G0Y0]
"I think lot of people are jumping into (green and
cleantech) figuring it's the next place to make money," said
Thomas Angell, principal-in-charge of the Private Equity
Practice at Rothstein Kass. "For the right technology...
there's obviously a price to be paid."
Green energy can include power sources including solar,
wind, geothermal and others that have a much lower pollution or
carbon footprint than fossil fuels. These are among the fastest
growing sources of energy but remain tiny compared with
traditional coal, oil and natural gas.
Cleantech companies aim to use technology to reduce
pollutants and waste generated by industries such as
manufacturing, energy, construction and transportation.
For new investments, private equity firms are most keen on
increasing their investments in technology, healthcare and
cleantech, the survey of 207 private equity fund managers said.
Most polled were small and mid-sized funds but the survey
included some mega-funds.
Private equity firms have been benefiting from an improving
economy and rising stock market valuations and have seen the
value of their portfolios increase. They have also taken
advantage of a rebound in M&A and stronger IPO markets to exit
some of their investments.
However, while debt markets have recovered since the credit
crisis -- allowing private equity firms to strike larger deals
-- valuations of assets have increased, making deals hard to
strike. Funds, which were left with a lot of 'dry powder' -- or
capital available to invest, have in some cases struggled to
invest that money.
"When the market crashed and everything stopped, there was
a lot of dry powder in a lot of private equity funds," said
Angell. "They probably figured they could make some great deals
on some of these businesses."
However, what ended up happening was that unless a business
was in dire need of clinching a sale, sellers "pulled off the
market," Angell said.
"So where you would have thought there may have been some
good deals going on, nothing happened for a while," he said.
Private equity managers were roughly split on whether firms
would increasingly strike leveraged buyout deals, and about
half polled thought buyout firms would increasingly club
together on deals, according to the survey.
More than 70 percent of respondents said they expect higher
deal prices in 2011 as compared with 2010.
Some private equity firms have struggled since the credit
crisis to raise money, as investors in their funds have had
less available capital to invest.
Nearly 50 percent of the private equity managers that
participated in the survey plan to raise capital in 2011,
Rothstein Kass said.
The survey said nearly 80 percent of private equity fund
managers expect pressure to reduce fees, an increase from 65
percent in Rothstein Kass' survey a year earlier.
(Additional reporting by Matt Daily in New York; Editing by