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Feature Article
Risks Associated with Private Equity Investments

In recent times, there has been a rise of Private Equity (PE) Investments. PE investment is a form of equity investment into private companies not listed on a securities exchange. It is a medium to long-term investment, characterised by active ownership. PE investments builds better businesses by strengthening management expertise, delivering operational improvements and helping companies to access new markets. The return is earned by selling the companies to another investor and/or listing on an exchange.

Investments in PE are susceptible to market risk. The key issue with PE investments is that market prices do not exist for them. The true asset pricing and risk measures for PE investments are ...

The Week That Was

What was likely the biggest news of the week, Graeme Wheeler, the Governor of the Reserve Bank of New Zealand (RBNZ), said that the NZ dollar was "unjustified and unsustainable" and "susceptible to a significant downward adjustment" from its current level. The strength of the statement, and outside the normal schedule of releases, led to a dramatic movement lower in the NZD – down 3.3% against the US dollar over the week and down 1.5% against the AUD. The key rationale for their call for the NZD to fall was the recent collapse in dairy prices which are now off 45% from their highs in February this year. To push the point further from his statements, it sounds very likely the RBNZ has also been selling the currency themselves. Helping the fall this week has been general strength in the USD reversing many years of weakness. This movement turned many investors’ minds to stocks that could benefit from the fall in the NZD against the USD including Fisher & Paykel (FPH), Diligent (DIL), A2 Milk (ATM) and Fonterra (FSF) as examples.

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