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Here comes a boom! $7 trillion in untapped funds to flood global market

By Catholic Online (NEWS CONSORTIUM)
8/18/2014 (3 years ago)
Catholic Online (www.catholic.org)

Investors clamor for capital investment with end of recession

A new boost to the global economic recovery may happen soon, as corporate giants and private equity firms prepare to tap into cash reserves of $7 trillion, stored since the current financial crisis began back in 2008.

A report suggests that corporations and equity firms hold nearly $7 trillion in cash reserves that could bolster the world's economy.

A report suggests that corporations and equity firms hold nearly $7 trillion in cash reserves that could bolster the world's economy.

Highlights

By Catholic Online (NEWS CONSORTIUM)
Catholic Online (www.catholic.org)
8/18/2014 (3 years ago)

Published in Business & Economics

Keywords: Economy, Business, Finance, International


LOS ANGELES, CA (Catholic Online) - Investors are growing frustrated by more than half a decade of prudence, demanding that chief executives begin to dip into stored reserves.

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"Capital spending could increase as early indicators show that industrial companies are beginning to run at higher levels of capacity than has been the case over the last five years," said Dennis Jose, a senior global and European equity strategist at Barclays. "When factories and the like are running at less capacity on the back of lower demand there is very low capital expenditure."

A report suggests that corporations and equity firms hold nearly $7 trillion in cash reserves that c

A report suggests that corporations and equity firms hold nearly $7 trillion in cash reserves that could bolster the world's economy.


After the world financial crisis began, companies hunkered down, re-engineering their balance sheets and diverting funds from investments to pay off debt or stockpile cash. But with the recession ended and the world's economy picking up, many of these companies continue to hoard cash.

Both private investors and governments are calling for the spending of these paper reserves held by 5,1000 of the world's biggest companies, which hold a combined reserve-cash and short-term debt-of $5.7 trillion as of the end of 2013, Thomson Reuters Datastream reports. This excludes financial companies, like banks and insurers, who are required by regulators to hire capital.

American corporations-led by tech giants like Apple, Microsoft and Google-dominate the pack with $2 trillion held.

"If a company has cash on its balance sheet, it has three options; mergers and acquisitions, invest in its business to pursue organic growth, or return it to shareholders," said Laurence Hollingworth, head of corporate coverage EMEA at JPMorgan.

A record number of investors are calling for companies to invest in more capital spending, while record low numbers of investors want the surplus returned to them via dividends and buybacks.

"Investors in private equity firms, which include pension and sovereign wealth funds, now have a greater risk appetite and are looking for returns in an environment with relatively low interest rates", said Richard Parsons, the head of private equity coverage at Deloitte. "They see the private equity market as being able to provide this."

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