Green-tech bubble worry for private equity: survey

Wed May 18, 2011 1:44pm EDT
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By Megan Davies

NEW YORK (Reuters) - Private equity firms are concerned about an investment bubble occurring in the green energy sector, among other hot industries, a survey of more than 200 fund managers said.

The recent credit crisis has made investors cautious and more aware of risks that can arise from crowded investment positions, according to the survey, carried out by tax and accounting services firm Rothstein Kass and released on Wednesday.

Green energy is the sector most likely to produce the next investment bubble, the survey said, with 24 percent of those surveyed highlighting it. Commodities was the second most likely, followed by gold and then financial services.

The respondents answered the questions in January, prior to recent falls in the gold price. The metal, as of Tuesday, is about $100 below its record highs above $1,575 an ounce set earlier this month.

"I think lot of people are jumping into (green and cleantech) figuring it's the next place to make money," said Thomas Angell, principal-in-charge of the Private Equity Practice at Rothstein Kass. "For the right technology... there's obviously a price to be paid."

Green energy can include power sources including solar, wind, geothermal and others that have a much lower pollution or carbon footprint than fossil fuels. These are among the fastest growing sources of energy but remain tiny compared with traditional coal, oil and natural gas.

Cleantech companies aim to use technology to reduce pollutants and waste generated by industries such as manufacturing, energy, construction and transportation.

For new investments, private equity firms are most keen on increasing their investments in technology, healthcare and cleantech, the survey of 207 private equity fund managers said. Most polled were small and mid-sized funds but the survey included some mega-funds.   Continued...