Private equity remains a highly contentious sector in Germany, with the infamous remark of German politician Franz Muntefering, who liked the industry to locusts, probably representative of the feelings of many.
Debates rage in parliament over how to control their activities, while newspapers bemoan their exploitation of the old and the helpless, with one case reporting the eviction of an old lady from her home by one uncompromising fund.
Christof von Dryander of Cleary Gottlieb Steen & Hamilton argued private equity has been a force for good in the German markets, modernising and restructuring industry and making the country’s economy more competitive. He believes they have been a net creator of jobs in Germany, contrary to some press reports, though this is always hard to prove, with their negative impacts often providing more popular news than the benefits they bring.
As to the popularity of private equity funds among German investors – and the survival of German funds – as the world economic problems continue, it is too early to say in an industry where cash is locked in for years. For now, noted von Dryander, the economy is still doing well and interest rates remain relatively stable, so the omens are reasonably good for the industry. If interest rates go up dramatically, he added, that is when private equity will come under real pressure.