Another day, another major private equity deal in the offing, this time Rebel Sport – and that’s just a tiny one on the global scale.

As the money continues to roll in, boosting the local stock market to new highs, some folks become increasingly worried about who’s carrying the risk from the high gearing private equity deals typical employ. Stephen Bartholomeusz puts the case nicely in the Smage.

But others are wondering if the different drum private equiteers march to might well keep a reliable rhythm, even if it is a bit racy – salsa perhaps, instead of the standard 4/4. When such a conservatively successful institution as Queensland’s QIC expresses that view, it has more weight than usual, especially when QIC is building its own private capital operation.

QIC has $50 billion under investment and, among many other things, is investment manager for QSuper, the nation’s second-biggest super fund with nearly 500,000 members. In an interview with Eureka Report, chief executive Dr Doug McTaggart says QIC is reducing its public equity markets exposure in favour of private equity, partly for the inflation-linked infrastructure assets on offer, partly for the reduced daily and monthly volatility.

“I have a view that the unlisted players, the private equity players, might be using different valuation metrics than the listed space,” says McTaggart. “They’ve got maybe a cheaper cost of debt capital. They get a longer time horizon. They can take these things private and get rid of all the regulation. They’ve got a longer timeframe. There are lots of reasons why they might be valuing some of these listed companies more highly than the markets have been and looking for opportunity there, particularly as the unlisted assets in their own space are getting a bit pricey.”

Peter Fray

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