Private Equity
Private Equity aims to help investors diversify beyond traditional public markets and facilitate companies in accessing capital. Over the last two decades, the private equity sector has grown significantly, driven by regulatory requirements for public companies and increased investor interest in alternative returns. Despite potential complexities, higher thresholds, and considerations of illiquidity, understanding the nuances of private equity investments is crucial.
Private Equity Defined
Private equity involves investing in the equity of non-publicly traded companies. Investors typically access these opportunities through private equity funds, where a General Partner (GP) manages investments on behalf of Limited Partners (LPs). The capital committed to the fund is used to invest in companies over multiple years, with the goal of increasing their value and realising a profit upon exit through an IPO, sale, or other liquidity events.
Investment Strategies
Private equity funds typically focus on four main investment strategies across the maturity spectrum.
1
VENTURE CAPITAL
VENTURE CAPITAL
2
GROWTH
GROWTH
3
BUYOUTS
BUYOUTS
4
DISTRESSED
DISTRESSED
Why Invest in Private Equity?
Private equity contributes value to portfolios in two ways:
Private equity offers investment opportunities not available in public markets, capturing value generated in private ownership.
Operational Influence: Private equity managers work closely with portfolio companies, influencing growth and efficiency. Concentrated ownership allows for more significant impact, offering expertise in various areas, from business scaling to technology integration.
Private equity has historically outperformed public equity markets over various time horizons, providing attractive returns. The sector’s focus on growth, resilience, agility, and innovation has contributed to its success.
Evolution of Private Equity
The private equity asset class, evolving from venture capital in the 1940s, has played a crucial role in financing innovation and supporting global economic growth. Venture capital strategies, initially funding groundbreaking technologies, have diversified to target specific sectors and development stages.
Buyout strategies, prominent since the 1980s, have shifted from debt-heavy models to active ownership and value creation initiatives. Today, buyout managers focus on growing portfolio companies and have teams dedicated to driving value through various initiatives.
The mix of companies acquired by buyout managers has evolved, emphasizing those shaping the future economy, including technology developers. While buyout portfolio companies feature lower debt portions than in the past, emphasis remains on resilient business models and predictable cash flows, capitalizing on opportunities in the technology industry’s evolution.
Private Equity Funds FAQs
Private Equity involves investing in the equity of non-publicly traded companies through funds managed by a General Partner (GP) on behalf of Limited Partners (LPs).
Private Equity funds focus on four main strategies: venture capital, growth equity, distressed investing, and buyouts, each targeting companies at different stages of maturity.
Private Equity provides access to unique investment opportunities not available in public markets and offers operational influence through close collaboration with portfolio companies.
Private Equity adds value by capturing private ownership-generated value and offering operational influence, allowing for significant impact on portfolio companies’ growth and efficiency.
Private Equity has historically outperformed public equity markets over various time horizons, showcasing attractive returns driven by growth, resilience, agility, and innovation.
Originally emerging from venture capital in the 1940s, Private Equity has played a crucial role in financing innovation and supporting global economic growth. It has evolved to include diverse strategies and sectors.
Private Equity managers work closely with portfolio companies, providing expertise in various areas such as business scaling and technology integration to drive growth and efficiency.
Investors can start by researching Private Equity funds on the GrowthInvest platform, understanding their investment strategies, historical performance, and potential risks. Consulting with a financial advisor is recommended for personalised advice.
It is simple to make an investment in a PE fund through the GrowthInvest platform. Speak to your adviser or visit our offers page. Here you will find an offer for numerous well established Private Equity fund. You can read our offer page and learn about the differences in strategy of the various managers. When you decide what to invest in, contact your adviser or simply click the Invest button on the offer, you and you adviser will receive a digital application form to start the process.
Private Equity investments are generally illiquid, and liquidity events, such as IPOs or sales, provide opportunities for exit. Investors should consider the longer holding periods associated with Private Equity.
Private Equity investments may have complexities, higher thresholds, and considerations of illiquidity. Understanding these nuances is crucial for investors considering this asset class. You can review the relevant structures on the GrowthInvest platform, or speak to your financial adviser regarding this asset class.
