By Jennifer Yousfi
Foreign sovereign wealth funds have been grabbing headlines lately with their well-publicized investments into struggling financial services firms like Citigroup Inc. (C) and Morgan Stanley (MS). U.S.-based private equity firms are starting to become part of the investment trend as well.
Late last month, Merrill Lynch & Co. Inc. (MER) announced a combined investment from Singapore-based sovereign wealth fund Temasek Holdings Pte. and private equity firm Davis Selected Advisors LP. In November, Citadel Investment Group, LLC made an investment in E*Trade Financial (ETFC), resulting in a 20% stake.
"Financials are going to be a big sector play in 2008," Joseph Russell, a managing director at Citadel, told The Wall Street Journal.
Many private equity firms have been laying the groundwork for months to make Russell's prediction a reality. In June, Washington, D.C.-based Carlyle Group announced the formation of a Financial Intuitions Group. The group – headed by Edward J. "Ned" Kelly III, former Chairman, Chief Executive Officer and President of Mercantile Bankshares Corp., and David K. Zwiener, former President and Chief Operating Officer of The Hartford Financial Services Group, Inc. (HIG) – seeks out global investments in the financial services sectors, including banking and insurance.
Kelly, The Wall Street Journal reports, is on the lookout for troubled firms that could benefit from an equity boost. He's also watching for firms looking to divest subsidiaries in order to raise some quick capital. Carlyle hasn't set a firm budget for financial sector investments and is willing to invest up to $5 billion in the right deal.
But not everyone is ready to buy-in on the financial sector trend. Berkshire Hathaway Inc. (BRK.A) Chairman Warren Buffet has yet to make a move in the sector despite being approached by financial firms seeking a capital infusion.
"People know our phone number, and we haven't seen anything we wanted to move on," Buffet said in an interview with CNBC last week. "That doesn't mean we won't in the next six months."
News and Related Story Links:
- The Wall Street Journal:
Private-Equity Players Scour Financial Sector for Bargains