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Norway's Biggest Buyout Fund: "There Are Asset Bubbles Wherever We Look"

"We’re more leveraged today than in 2006-2007," warns Thomas von Koch - managing partner at EQT, the largest buyout fund in the Nordic region, adding that "there are financial bubbles being built up and how they’ll be solved, I don’t know." As Bloomberg reports, von Koch concludes, an unprecedented era of monetary stimulus is inflating asset prices across markets to extreme levels, with history offering little help in predicting how it will all end - "The problem is global, not just for Europe. It’s the asset bubbles in general that concern me. It’s wherever we look."

As Bloomberg reports,

The biggest buyout fund in the Nordic region says an unprecedented era of monetary stimulus is inflating asset prices across markets to extreme levels, with history offering little help in predicting how it will all end.

 

“There are financial bubbles being built up and how they’ll be solved, I don’t know,” Thomas von Koch, managing partner at EQT Partners in Stockholm, said in an interview. “The problem is global, not just for Europe. It’s the asset bubbles in general that concern me. It’s wherever we look.”

 

“I can virtually toss those textbooks in the fire,” said von Koch. From an investor perspective, the development means stocks that track economic cycles are less appealing, he said.

 

...

 

Instead, von Koch says excessive leverage fueling a hunt for yield is something “one should be wary about.”

 

Debt levels are approaching those recorded in 2006 and 2007, just before the global economy lurched into its worst crisis since the Great Depression, according to von Koch.

 

“You also have a private market chasing yield with a bond spread between those and debt provided by the banks that has never been as narrow as it is today,” von Koch said. “And the underlying economies for the companies, you don’t have much growth. From that perspective, we’re more leveraged today than in 2006-2007.”

As Citi's Matt King recently noted, it appears one by one, investors are losing faith in the 'bubbles'...