PE

CFA Level II Alternative Investments
#1

Why would a PE able to raise debt at favourable (lower) rates? (Shouldn’t they be higher with unpredictable cash flows?)

#2

PE firms usually buy out targets that have solid CFs to being with. VCs invest in companies with high burn rates and unpredictable CFs.

#3

More to the point, PEs borrow based on their credit history, not the credit history of the company they’re buying.

#4

*be

Thanks :slight_smile:

#5

Also, i was kinda taken aback to know REITs are considered to be less risky and the expected return to be lesser than equities.

(Far from ever being that way in my part of the world, but then as it turns out, that’s just that)