You want to diversify, you have a long investment horizon and the relevant funds to invest? – Private equity investments could be the answer.
According to the definition provided by the European Venture Capital and Private Equity Association (EVCA), private equity is a form of equity investment in private companies not listed on the stock exchange. Private equity investors can either be institutions – such as pension funds, banks or insurance companies – or wealthy individuals. These investors provide capital to privately owned companies not listed on the stock exchange, both start-up and more established businesses. These companies use the capital to expand their business and increase their enterprise value. At the end of this process, known as the «exit», the investor can sell their shares to other company partners or external investors. In some cases the entire company is floated on the stock market, which provides an exit route for all the current shareholders.
There are basically three ways of investing in private equity:
- The backers invest their money directly in a company.
- They invest in individual private equity funds which use the capital to invest in the shares of unlisted companies.
- Or they choose a private equity fund of funds, which in turn invests in a range of private equity funds.
Private Equity Invest AG acts as an intermediary for direct shareholdings that an existing investor wants to sell on to another investor, or for the onward sale of existing private equity holdings already owned by another company (private equity secondary market).
Adding private equity investments to traditional asset classes such as equities is a good way to diversify an investment strategy and can improve a portfolio’s risk/return profile. Private equity offers the chance of attractive returns, although the corresponding level of risk is higher. This type of investment is only suitable for investors with a long-term horizon.