(1888PressRelease)
November 25, 2007 - Research conducted by McKinsey Global Institute has suggested that, far from engaging in asset-stripping practises, the best private equity firms actually improve the performance of the companies they buy.
According to Diana Farrell, director of the McKinsey Global Institute, just one in four funds significantly outperforms pubic equity markets, and half of these funds produce negligible returns.
However, the funds in the top quartile significantly improve the performance of the companies they acquire, Ms Farrell says in an article for Business Week, and this rubs off on other firms in the sector as they are forced to review their operations and strategies.
A further positive impact of private equity firms is that their activity has prompted shareholders to more closely scrutinise the performance of company managers.
Managers, meanwhile, are put under greater pressure to perform.
The McKinsey study shows there was $710 billion in assets under management in global private funds as of the end of 2006.
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