In minutes from its March quarterly meeting, the FPC said: “The private equity sector, which is closely related to private credit and leveraged lending, plays an important role in channelling finance to the UK real economy.
“Finance for riskier corporates could be particularly vulnerable to a significant deterioration in investor risk sentiment.
“More recently, higher interest rates have made it more difficult for private equity funds to raise investment, contributing to downward pressure on asset valuations.”
Private equity trade body BVCA cautioned against viewing the industry’s use of debt as dangerous.
Michael Moore, chief executive of the BVCA, said: “The private equity model of active ownership focuses on delivering long-term growth.
“Where leverage is used, it is part of a capital structure appropriate to the business using it. Lenders are sophisticated commercial parties and are incentivised to ensure that the arrangements promote the company’s growth prospects.
“As we saw during the global financial crisis, the PE model is tried and tested. Private capital has been an important part of the UK economy for over 40 years, showing its resilience through different economic cycles.”
Bank officials also signalled that investors may be too optimistic about the economic recovery and interest rate cuts.
Robert Johnson is a UK-based business writer specializing in finance and entrepreneurship. With an eye for market trends and a keen interest in the corporate world, he offers readers valuable insights into business developments.
