Private equity bonanza

TEXT OF STORY

TESS VIGELAND: If the first six months are any indication, this year could break records for private equity fund raising. But having so many dollars in play could mean too much of a good thing. Janet Babin explains.


JANET BABIN: US private equity firms raised more than $96 billion in the first half of this year, numbers not seen since the dot-com days of 2000 — just before the bottom fell out and the market crashed.

That's what worries Mitch Mumma of Venture Capital firm Intersouth Partners:

MITCH MUMMA:"I just hope the industry remembers what happened the last time it has access to more capital than it could profitably deploy."

Leveraged buyout firms do most of the fundraising. They take over mature companies, then demand aggressive growth.

Tennille Tracy is with Dow Jones Private Equity Analyst.

TENNILLE TRACY:"Funds that are raising an historical amounts of money, record breaking money, that's really what fueling the increase in fundraising."

But if the funds get too much money, they start competing for the same investments. That can drive prices up and returns down.

I'm Janet Babin for Marketplace.

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