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Pzena cautious on asset bubble

November 30, 2006
10qk

Renowned US asset manager Richard Pzena has warned that private equity specialists could be riding for a fall as rising stock markets force them to pay top dollar for targets.

He said: “I’m wary about the prospects for private equity. Firms are often paying more for companies than we would.”

Pzena, a value specialist, said corporate profit margins have hit record levels. “I can’t believe the run will continue much longer.” He said value stocks are standing at a premium of 2.5 times book value.

“We will continue to be fully invested in equities but there are fewer bargains around than in the past,” he said.

Pzena is unconvinced by the argument that growth investors will push stocks higher, bailing out private equity managers along the way.

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