Big UK schemes warm to private equity

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UK - Representatives of some of the largest UK pension funds have come out in favour of private equity as an asset class - though they say a "new professionalism" is needed.

Speaking at a conference organised by SPS, David Gamble, former chief executive of British Airways Pension Investment Management, said private equity should have a place in a diversified portfolio.

But he warned that "the best funds are not waiting for our money and will always be funded. And you've got to keep up a proactive approach".

Transparency was not an issue, as private equity isn't rocket science according to Gamble - "it is much more real than hedge funds".

Still, it is now a much more competitive industry.: "It is no longer a Friday afternoon occupation. A new professionalism is needed, where you either need to staff up or outsource."

The positive attitude was shared by other delegates who agreed that pension funds should be using uninvested cash.

However it was pointed out that investors have to consider private equity as a long-term investment.

"You commit the money as of day one - you have nothing invested, but you have committed yourself," one delegate observed.

Gamble highlighted that private equity is very much correlated with public equity.

But there was a problem in that private equity is not a very level playing field. According to some it is therefore not surprising that private equity returns have been, and will continue to be, superior to the public area.

Gamble expressed some worry about private equity's current high profile. "It worries me, because returns might start to hover."

And then there was the disturbing trend where the best public company executives quit for higher paying private equity jobs.

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