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Investing in Private Equity

There are different ways for investors to invest in private equity: direct, through funds on a primary basis and through funds on the secondary market, with the latter two being the most common forms for institutional investors.

Private equity has shown its ability to outperform traditional public asset classes over the last decades with usually 3% to 6% per annum on average. With good selection ability this premium has been even higher. In the current market environment in which interest rates are on a record low, institutional investors – especially pension funds and insurance companies, which need to generate a defined yield on some of their products – are looking for return-seeking investments. A well structured and selected private equity program will be able to offer an attractive solution for these investors going forward.

Due to the strong return dispersion between private equity funds, it is essential to select only the strongest performing funds to achieve attractive returns. While historically investors have chosen to invest indirectly in private equity primarily through fund of fund structures, this trend has reversed over the last years and investors are seeking more direct exposure to private equity funds through primary commitments and secondaries.