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Pi Capital tips healthcare, media and leisure for 2006

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Pi Capital, the independent private equity house, expects a significant upturn in UK private equity activity in 2006, with healthcare, media and leisure tipped as the hottest sectors. This is the view of Pi’s around 250 members, representing the UK’s largest and most powerful private investors’ network, who were polled for their views earlier this month.

About 60% of the respondents to Pi’s survey thought that private equity investment, fund raising and exits would all be up significantly in 2006, while close to 40% tipped healthcare, media and leisure as the likely hottest sectors.

Pi Capital members include Stuart Rose, Sir David Frost, Brent Hoberman, John Moulton and Will Hobhouse. The estimated investment firepower of Pi members has been put at between £3.5 to £10bn. Pi’s around 250 members were also polled in a survey on the outlook for key UK economic indicators in 2006, with a response rate of close to 50%.

Some 60% of respondents thought that UK GDP growth would continue to be weak, at about 1.75%, in 2006, with close to 25% believing that the UK will register 2% growth - only just managing to beat the Chancellor Gordon Brown’s projected growth rate of 1.75%. Members stated that factors such as the high oil price, rising utility bills and higher taxes (largely council tax) would all have a negative impact on the economy.

Against this background, the consensus (53%) was for the FTSE-100 to stall at around 6,000 by the end of this year. Members cited: ‘difficult year with global imbalances coming to the fore’ and ‘slower US economic and corporate profits growth’ having a hangover effect on the UK market.

Not surprisingly, given this weak economic and markets backdrop, members thought (58%) that UK short-term interest rates would fall – to 4.25% by year end. The most pessimistic forecast was for rates to fall as low as 3.75%. The trade off for the easing in rates was a perception (40%) that inflation would be on the rise in 2006, increasing from around 2.1% currently to 2.25%.

On the indicator that is closest to the hearts of all UK householders, average UK house price inflation, Pi members were solidly conservative, predicting an increase this year of just over 3%, although one member was optimistic enough to forecast 10% growth.

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