Introduction

Private equity has emerged as an increasingly visible part of the investment landscape in recent years. But does this form of investing suit you? After all, each form of investment has its own ratio of risk and return, and in terms of time frame and related liquidity, different forms of investment also vary widely. In this blog, we look at the profile of private equity investing and you'll discover if it's a good fit for you, too.

Characteristics of private equity investors

Within private equity, a certain investor profile recurs regularly. These are often parties who are used to looking at investments with a longer time horizon and are less dependent on immediate liquidity. Private equity funds typically have a term of ten years or longer, where capital is invested in phases and paid out later: so if you invest in PE, you are committing your money for a longer period of time.

In addition, within this asset class there is indirect involvement in the development of companies, leaving strategic choices, for example on internationalization and operational improvements, to the fund managers. Some investors like the fact that the professionals of these funds - who often have years of experience in this type of process - make the choices, while other investors prefer to be a bit more at the controls themselves.

Situations in which private equity is considered

How private equity is included within a portfolio varies from investor to investor and is related to factors such as objectives, available funds and preferences regarding risk and duration.

Private equity is often viewed in the context of a broader investment strategy, where different asset classes coexist. Because private equity focuses on unlisted companies, valuations develop differently from listed assets - so these forms of investing complement each other well.

Return is obviously one of the most important arguments for investing in private equity, as is the fact that, especially when investing broadly through funds-of-funds, as with Marktlink Capital, diversification is also an important argument. By investing in between 10 and 20 funds.

In addition, through private equity you invest in what you know well as an entrepreneur: ambitious growth companies in SMEs.

Situations in which private equity is less suitable

There are also circumstances in which private equity is less of a good fit with an investor's wishes or capabilities. A key characteristic is limited liquidity. Capital usually remains fixed for a longer period of time and is not easily withdrawable in the interim, except through specific markets such as the secondary market. In addition, minimum investment amounts are often at a higher level than traditional investments, making participation not accessible to everyone. The course of returns can also be less predictable, as they depend on the performance of individual companies and market conditions. For investors who value flexibility, immediate availability of capital or a clearly predictable pattern of returns, this form of investment may not fit the bill.

Frequently Asked Questions

What is private equity?

Private equity refers to investments in unlisted companies, where capital is used to grow companies and later sell them with a certain result .

On average, how long does a private equity investment last?

The duration of private equity funds is usually around 10 years or longer, with investments and distributions spread over this period .

Why is private equity less liquid?

Private equity is less liquid because investments are made in unlisted companies. As a result, there is no daily market in which holdings can be easily traded.

Who typically invests in private equity?

Investors often consist of institutional parties such as pension funds, but wealthy individuals and entrepreneurs also participate .

What determines returns within private equity?

Returns are determined by the performance of the underlying companies, the fund's strategy and market conditions at the time of sale.