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Amundi executive says some private equity valuations are comparable to ‘Ponzi schemes’


Vincent Mortier, chief information officer at Amundi

Vincent Mortier, chief information officer at Amundi

Vincent Mortier, chief information officer at Amundi

Some parts of the private equity market are beginning to resemble a Ponzi scheme, according to the chief investment officer at Amundi, one of Europe’s top asset managers.

Speaking at a virtual press briefing yesterday, Amundi CIO Vincent Mortier said the volume of money raised in recent years by private equity houses had driven up valuations and incentivised firms to buy assets from one another at inflated prices.

“We are in a big bubble in the private markets,” Mr Mortier said. “If I take an extreme analogy, for some parts, the private equity market may look like a Ponzi scheme – a pyramid – in a way.”

Globally, private equity has been one of the biggest winners of rock-bottom interest rates over the past decade, as investors have turned to the asset class in a bid to boost yields. According to a report by consultants Bain & Co, last year saw buyout firms invest a record $1.1trn (€10.3trn) in new deals, buoyed by strong fundraising and mounting levels of unspent capital.

Amundi had around €11bn of assets invested in private equity at the end of 2021, according to its annual report. That’s a small portion of its €2trn in total assets under management, which makes it one of Europe’s biggest investment firms and among the top 10 global players, with 100 million clients.

“The vast majority of deals are currently done between private equity players,” Mr Mortier said. “One private equity player will sell to another one, who is happy to pay a high price because they have attracted a lot of investors.”

That ability to sell to peers has enabled firms to avoid marking down the value of the assets they own, despite a broader selloff in the public markets.

“When you know you are able to exit your stake to another private equity house for a multiple of, let’s say 20, 25 or 30 times earnings, then of course you won’t mark down your book,” Mr Mortier said. “And that’s why I’m talking about a Ponzi, because it’s a circular thing.”

Still, Mr Mortier also said there are good returns to be made in private markets with the right managers and in private debt.

“My point is not to say all private equity is bad – there are some very, very good opportunities,” he said. “But sometimes there are no miracles.” 

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