Private equity: finally accessible to private investors?
New: private equity fund now open – could you qualify to receive more information?
A highly respected private equity fund – managed by the private equity team of a multi-$billion investment house – is now available for the first time to private investors. The minimum investment is £25,000, only through Wealth Club.
It is an opportunity to access the growth potential of private equity but through a simpler, more flexible and more liquid structure than traditional private equity funds. You could get access too, but first, we are required to check if you qualify. Note, the first subscription deadline is 14 December.
It has been described as “one of the most profound shifts in the capital markets since the 19th century”: from Uber and Airbnb to China’s ByteDance, owner of TikTok ($300+ billion valuation), and Elon Musk’s SpaceX ($100 billion valuation), companies are staying private for longer.
As a result, much of the corporate world’s growth, innovation – and returns – are happening outside the stock market.
This is part of a wider trend: the boom in private equity investments is one of the biggest global investment stories of the last decade.
Those allowed to invest, historically institutional investors or the ultra-wealthy, have been well rewarded. Private equity funds overall have consistently outperformed their public market equivalents over the last 15, 20 and 25 years. Note, past performance is not a guide to the future.
Private investors have so far been missing out.
But this is changing. Today, new investment structures are removing some of these barriers, making private equity accessible to experienced private investors, usually alongside leading global institutions, with minimum investments of as low as £25,000.
Find out more about investing in private equity as an asset class – watch now:
The appeal of private equity
There are several factors that contribute to the growing appeal of private equity investments, including:
1. Potential for superior returns
Adding private markets investments to an existing long-term investment portfolio has the potential to improve its risk-adjusted return.
Private equity funds overall have historically outperformed their public market equivalents. Based on data from the last 25 years to 30 June 2021, private equity funds have outperformed global equity funds by 8.9% p.a. and US equity funds by 7.5% p.a.
Please remember past performance is not a guide to the future: returns are not guaranteed and capital is at risk.
The chart below shows the cumulative performance of various public and private market fund peer groups over the last 25 years to 30 June 2021.
Cumulative performance in the past 25 years
Source: Cobalt, Hamilton Lane, Morningstar. Past performance is not a guide to the future. The chart shows fund peer group performance over the period 30/06/1996–30/06/2021. All returns are shown in USD. Private market index data is based on returns from funds in Hamilton Lane’s Cobalt database. See below for definitions and discrete performance.
See five-year discrete performance of asset classes
See definitions used in the chart
2. Access to high-growth companies not listed on a stock market
Looking at potential investment opportunities, public companies represent the small tip of a much larger iceberg. Companies are staying private for longer and some may never list at all, leaving more of the growth and innovation they can generate to accrue in private hands.
The number of US public companies shrunk from 7,810 at the beginning of 2000 to 4,814 at the end of 2020. In the US alone, of the 20,132 companies that generate over $100 million of revenue per annum, 17,520 (87%) are private companies. By this measure, investors allocating only to public equities are limiting their opportunity set to just 15% of the largest firms in the US.
3. Potential for adding diversification to existing long-term portfolios
An allocation to private markets could improve portfolio diversification. Private markets have shown low correlation with other asset classes. This could be particularly attractive in an environment where performance and value of traditional asset classes, such as equities and bonds, come under pressure.
Indeed, a recent study shows that 90% of large institutional investors surveyed aim to increase their allocations in one or more private asset classes over the coming year, amid a growing focus on the benefits of diversification driven by the economic and financial impact of the pandemic.
Introducing private equity deals from £25,000
We’re talking to a number of institutions – some of the largest and best-known in the world. Indeed, the first opportunity is due to launch at the end of November.
However, before we can send you any details, you need to complete a questionnaire that assesses both your investment experience and financial circumstances. You'll also need to apply to become an ‘Elective Professional Client’ (EPC) of Wealth Club. Could you qualify?
What are the main risks?
Private equity investments are a long-term commitment, longer than most. For that reason, you should not invest money you cannot afford to lose. These are for very experienced investors only. Capital is at risk and returns are not guaranteed.
Many factors could affect the performance of the investment. If you qualify to access these deals, each will have relevant offer documents which contain more details on the specific risks and you should read these carefully.
Private equity funds may be denominated in euros or US dollars, meaning there is currency risk. The return may increase or decrease as a result of currency fluctuations.
The deals are often structured as limited partnerships. Investors will need to confirm they agree to the terms of the partnership before applying. You should carefully familiarise yourself with the terms of the partnership agreements before investing.
Before sending you details on private equity deals we are required to check if you are eligible. If you are interested, please complete our questionnaire to see if you qualify.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.