Wealth · Private Equity
Private equity: unlocking growth in unlisted companies
A sophisticated form of investment in capital not listed on a public exchange. PE firms raise funds from institutional and accredited investors to acquire stakes in private companies, improve their operations, and eventually sell them for a profit.
The basics
What is private equity?
Private equity refers to investment funds that invest directly in private companies — or buy out public companies and delist them. These funds typically take a controlling stake, letting them actively shape management and operational strategy.
Illiquid investments
Unlike listed stocks, PE stakes can’t be easily bought or sold on open markets.
Long-term horizon
Typically 5–10 years, to allow for operational improvements and value creation.
Active management
PE firms are hands-on in the management and strategic direction of portfolio companies.
High minimum investment
Access is generally restricted to institutions and high-net-worth individuals.
The case
Why invest in private equity?
Potentially higher returns
Historically, PE has shown potential for higher long-term returns than public markets, aided by active value creation.
Diversification
Performance may not correlate directly with public-market swings, adding portfolio diversification.
Access to growth companies
Exposure to unlisted businesses — high-growth startups and transforming mature firms — not available publicly.
Active value creation
PE firms improve efficiency, expand reach and optimise capital structure to enhance value.
Less volatility (perceived)
Illiquidity and infrequent valuations can make PE appear less volatile — though underlying risks remain.
Vocabulary
Key concepts in private equity
- Private Equity FirmAn investment management company that raises private equity funds.
- Private Equity FundA pooled investment vehicle that invests in private companies.
- Limited Partners (LPs)Investors who commit capital to a fund — pension funds, endowments, HNIs.
- General Partner (GP)The PE firm that manages the fund and makes investment decisions.
- Management FeesFees paid by LPs to the GP for managing the fund (typically 1.5%–2.5% of committed capital).
- Carried InterestA share of fund profits paid to the GP — typically 20% above a hurdle rate.
- Leveraged Buyout (LBO)Acquiring a company using a significant amount of borrowed money.
- Venture Capital (VC)A subset of PE focused on early-stage, high-growth companies.
- Growth EquityCapital for mature companies expanding without a change of control.
- Distressed InvestingInvesting in financially troubled companies to restructure and turn them around.
- Exit StrategyThe plan to sell an investment for returns — IPO, sale to a company, or to another PE firm.
Know the risks
Risks associated with private equity
Illiquidity
Capital is locked up for years, making it hard to access funds quickly.
High risk of loss
You could lose a significant portion — or all — of the invested capital.
Lack of transparency
Private companies face fewer disclosure requirements, so less information is available.
Dependence on the GP
Returns rely heavily on the managing firm’s expertise and performance.
Leverage risk
LBOs use substantial debt, which can amplify losses.
Valuation & fees
Valuing private companies is complex, and management fees plus carry can erode net returns.
Getting in
How to access private equity
Fund of funds
Funds that invest across many PE funds — offering diversification and lower minimums than direct investment.
Listed PE companies
Some PE firms are publicly traded, letting you buy shares in the management company itself.
Business Development Companies
Publicly traded BDCs invest in small and mid-sized private companies via debt and equity.
Crowdfunding (accredited)
Some platforms offer direct private-company deals to accredited investors — usually smaller.
Consult an advisor
For HNIs, an advisor specialising in alternatives can guide direct fund investments.
Is private equity right for you?
A powerful component of a long-term strategy
PE suits investors with a high risk tolerance and a long horizon. Given its complexity and illiquidity, thorough due diligence and professional advice are strongly recommended. Talk to our wealth team to explore your options.