Everything You Need to Know About Private equities

What are Private Equities?

“Private Equity” is a generic term for investments in privately held companies. They are also called “Private Markets” or Illiquid Alternative Assets. Private equity involves investing in privately held companies, ranging from small, early-stage growth companies to large enterprises across various industries and locations. Private companies play a crucial role in the global economy and can take a more long-term approach compared to public companies, which often focus on short-term fluctuations in share prices.

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How private equity funds are structured

A private equity fund is a collection of money used to invest in privately owned companies that match a set investment strategy. The fund is managed by a private equity firm, which acts as the ‘General Partner’. Investors who contribute money to the fund become ‘Limited Partners.’

Private equity funds aren’t investments that can go on indefinitely. The “Fund Term” is the finite technical life of a fund, usually ten years with optional extensions, unlike public equity funds that operate on a rolling basis. A fund’s life is generally viewed in three parts:

  • Formation – The pre-launch period involves creating the partnership, determining the strategy, drafting offering documents, and identifying initial target companies.
  • Investment – The investment period is when the fund invests in target companies, issues capital calls, and maximizes returns for investors.
  • Harvesting –The period during which the manager arranges exits from target companies and makes distributions of capital back to investors.

Why Invest In Private Equity?

Vast market opportunity

The universe of private equity is vast, as most companies globally are privately held.

History of outperformance

Private equity has a history of outperforming stocks with lower volatility over the long run. Essentially, investors can receive extra compensation since their assets cannot be easily or quickly cashed in.

Asset Class Diversification

Private equity has a low correlation with public equities, offering diversification benefits. Managers invest capital directly into private assets and work to increase their value over time. On the other hand, public equity investments are influenced by analyst valuations, momentum trading, leverage, and short selling.

Value Creation

Private equity investors can assist businesses in achieving growth through active engagement and value creation strategies, such as reshaping leadership, operations, and finances.

What To Consider

While there is potential for higher returns, there are additional factors to consider when thinking about investing into the private market and reviewing private equity offerings.

A long-term investment horizon

Private equity investors typically need to allow for a five to twelve year investment horizon.

Due diligence of general partners is critical

Private equity fund partners are called general partners, and investors or limited partners. The primary expertise of a private equity firm lies in managing a fund, so the Limited Partners delegate all control to the General Partner. General Partners add value by selecting management teams, improving operations, governance, and financial structure.

Limited Access

These funds may not be readily available for the average investor. Investors need to meet asset requirements to show they have sufficient liquidity to meet initial investment and capital calls.

Private Equity Offering Examples

Trajan Offering Examples

These are some examples of offerings as of April 2024 and are subject to change. Speak with one of our advisors to get the latest information on all of our private equity offerings.

With tightening money supply and lower expected returns from all risk assets in the coming years, we believe allocations to private markets may be essential to generate the type of returns that enable investors to fund-long term liabilities.

Need help deciding if Private Equity investing is right for you?

Having an active role in financial planning includes bringing assets together to allow you more investment choices and on-going monitoring, not leaving them where you can’t actively manage them.
*Investment in private equity may require accreditation.*