How Private Equity Scores over Listed Capital

A recent report on “Executive Pay” in The Economist (20th January 2007) summarized how private equity scores over listed capital.

The boards are staffed by knowledgeable directors.
Directors are intensely involved. Their bonuses depend on company’s performance.
The focus is on a medium term goal of listing or selling a company that will fetch a good price.
The long-term cannot be used as an excuse for postponing tough action.
Managerial pay in private equity is attractive. But it is aligned with success or failure.

No wonder, there are thousands of private equity firms today managing billions of dollars of capital. The action is now spreading all over the world. Citigoup has announced it will set up a new $200 million fund dedicated to Africa. Many of the bigger players plan to increase their commitment to emerging markets in the next five years.