SINGAPORE (Sept 15): The private equity industry will continue to play a growing role in financial markets, fueled by low yields and investors’ willingness to forgo traditional risk protections, Michael Milken said.

“This is their golden age,” Milken, who helped pioneer the junk bond market at Drexel Burnham Lambert Inc., said Thursday in an interview with Bloomberg Television in Singapore. “You can leverage, you can borrow without covenants, and so for equity holders it affords you very unusual rates of return.”

Private equity firms are raising near-record amounts of capital from investors starved for yield. So-called dry powder, money raised that hasn’t been deployed, is at a record US$963 billion ($1.3 trillion), according to data from Preqin Ltd. Milken, who now runs his own research firm and focuses on philanthropy, said the decline of maintenance covenants, which help protect lenders from adverse credit events, is a key driver in the growth of private equity.

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