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Another inflation hedge: private equity [ClearOnMoney]
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Another inflation hedge: private equity

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Commentary

Another inflation hedge: private equity

8 Dec 2009 by Jim Fickett.

Yesterday Matthew Lynn, a Bloomberg columnist, wrote an article disparaging gold and suggesting other inflation hedges. One idea in the article was new to me: private equity funds as an inflation play:

a leveraged buyout firm buys well-established companies, in basic industries, and then loads them up with lots of debt, while hanging on to a little bit of equity. Inflation will effectively wipe out all that debt. The result? The equity that is left over will be worth far more.

In general, of course, it is better to be a debtor during inflationary periods, so leverage, whether in your home, a rental property, or a private equity fund, is an advantage.