Pension funds are seeing some good numbers coming down the PIPE.
Some 1,100 private placements in public companies, or PIPEs, represented a $19 billion market in 2003, and pension plans are being drawn to the investment strategy, said Steven Dresner, a third-party placement agent who also publishes a monthly PIPEs Report. He was vice president of the investment banking group at Ladenburg Thalmann & Co., New York.
Investors like them because they can be completed in a couple of weeks, unlike some private equity investments, which take much longer to place, Mr. Dresner said. Bankers and money managers offer PIPEs because fees are bigger, he said.
These factors are leading to a PIPEs comeback from the halcyon days of 2000 when PIPEs investments represented a $25 billion market. Last year was the first year of growth from the market's $17 billion low in 2002.
"The market declined, but much less quickly than the follow-on equity offering," Mr. Dresner said. "Large companies are getting involved, and $21 billion is predicted for 2004."
A number of pension funds — the C$68.2 billion (US$50.1 billion) Ontario Teachers' Pension Board, Toronto; the $13 billion pension plan of BellSouth Corp., Atlanta; and the $17.2 billion defined benefit of Honeywell, Morris Township, N.J. — are investing in PIPES as an opportunistic investment, Mr. Dresner noted.
Among the private equity funds investing in PIPEs are Apax Managers Inc., New York, and Silver Lake Partners, Menlo Park, Calif.