Private equity refers to the holding of interests in unlisted companies. Private equity managers typically have an influence on a company’s strategic and financial positioning. Operating experience, investment expertise and a hands-on leadership style of good private equity managers result in high added value in portfolio companies. Private equity investments are classified by strategies and the stages in a company’s development.
Our private equity activities focus primarily on investments in buyout and growth capital funds, as mature companies frequently have a more attractive risk-return profile. When interesting opportunities arise, other attractive strategies (e.g. distressed debt, secondaries) are employed as well.
In the past, investors have earned higher risk-adjusted returns on private equity than on many other asset classes. The selective addition of private equity holdings may have positive effects on a portfolio in terms of diversification and risk profile. The attractiveness of private equity is attributable mainly to the following reasons:
- Historically, the top 25% of private equity managers have outperformed stock markets by 5% to 8%
- “Stickiness of returns" – with private equity, past performance is indeed an indicator of future performance
- "Legal insider information” – with private equity, investors have a substantial leading edge on information over stock markets
- Entrepreneurial approach – private equity managers have a strong influence on a company’s capital structure and strategy
- Huge investment universe – the number of privately held companies by far exceeds the sector of exchange-listed companies
- Limited competition – the relatively high degree of complexity results in natural entry barriers