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Too Much Cash – 06.29.2010Last week both the Wall Street Journal and New York Times ran articles about the piles of capital that has built up in the coffers of private equity shops, a record $280 billion to be exact for US-based buyout firms. Most of the cash had a five-year string on it, and for some the deadline to invest is fast approaching. The conundrum the private equity guys have is that if they have to hand it back, raising new capital isn’t so easy anymore. So as they scramble for investments, what’s on everyone’s mind is the specter of the firms lowering the bar on the quality of investments they make to put the cash to work. Closer to home, the story is the same, if not more extreme on the real estate front. The lack of action is deafening and it appears that most investors are going back to the beach this summer to wait it out and hope for transactional activity to emerge in the 4th quarter. Clearly this is going to be a slow and steady return to the “new normal,” and the full impact on real estate organizations is still unclear. Don’t forget the coconut oil.

Tony LoPinto is a senior client partner and head of Korn//Ferry International’s Real Estate Practice and founder of SelectLeaders. The views expressed in this article are the author’s own.

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