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Private equity firms are looking as far as Abu Dhabi to fund larger deals, according to buy-out leaders.

For bigger acquisitions sovereign wealth funds (SWF) are being called on to replace the investment hole left by cautious banks. Speaking at the Super Return conference in Munich this week, Terra Firma head Guy Hands said that PE firms were already talking to a number of Middle Eastern and Asian state-backed SWFs. Hands stated that the world’s biggest SWF, Abu Dhabi Investment Authority, “will effectively replace Wall Street.”

While bigger players are struggling to find debt to push deals through, the small and medium market is proving to be more adaptable in a harsher climate. A spokesperson from VC and PE firm 3i said: “The deals are still there to be had and we’re still finding the finance.

“Whereas before we could gain the total funding from one bank, we have to go to maybe three or four, but that’s not seen as a constraint. The opinion here is that there will be a degree of uncertainty in some sectors until the end of the year.”

Investment for larger PE firms is harder to come by, with several alternative sources aside from SWFs being sought, such as public pension funds, hedge funds and mutual funds.

Tony James, president of Blackstone Group, told the conference his firm was already in contact with hedge funds and mutual funds to raise debt, after acquiring GSO Capital Partners to expand its hedge fund and credit businesses.

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