Private equity is no longer the preserve of large institutions. Families, entrepreneurs and family offices increasingly invest in unlisted companies. There are several routes in, each with a different profile of cost, control and liquidity.
For decades, investing in unlisted companies was reserved for pension funds, insurers and large institutions. Today, business-owning families, private investors and family offices account for a growing share of the capital invested in private equity. For anyone who has sold a business or holds significant wealth, it is an asset class that is hard to ignore. But it has its own rules, which are worth knowing before going in.
What it is, in practice
Investing in private equity means buying stakes in companies that are not listed, usually with the aim of growing and improving them and selling a few years later at a gain. The return comes mainly from the value created on exit, not from regular dividends.
The four routes in
Private equity funds
The investor commits capital to a fund managed by a professional team, which invests it in several companies over a few years. It offers diversification and professional management. In return, it charges management and performance fees, and the capital is committed for ten years or more.
Co-investments
The investor goes directly into a deal led by a fund, alongside it. Lower costs and deal-by-deal choice, but more concentration.
Club deals
A small group of private investors comes together to buy a company, with an organiser who finds the deal and structures it. More control and transparency, but it requires alignment between investors.
Direct investment
The investor buys a stake in a company alone. Maximum control, but it requires in-house capacity to analyse, negotiate and monitor.
What you gain and what you risk
- Higher return potential than listed markets, partly as a premium for illiquidity.
- Illiquidity. The capital is tied up for years. There is no quick way to sell if the money is needed.
- Wide dispersion of results. The gap between the best and worst managers — and between the best and worst deals — is far larger than in listed markets.
- Periodic, estimated valuations. Portfolio value is calculated by the managers, not the market, and is only confirmed on sale.
Rules of prudence
- Size the exposure. Only invest in private equity capital that will not be needed for at least seven to ten years.
- Diversify over time. Spread commitments across several years rather than investing everything at once.
- Diversify by manager and deal. A single bet is a concentrated risk.
- Choose on track record and alignment of interests, not on the presentation.
- Understand all the costs, including the indirect ones.
Where to start
For an investor without experience, the most prudent path is to begin with one or two co-investments or club deals supported by an independent adviser, and only then consider a broader portfolio. Following a deal from entry to exit teaches more than any presentation.
GestInvest provides access to co-investments, club deals and selected private equity opportunities, analysing them from the investor’s side. Read more about our investments and private investment access, or about co-investing alongside a fund.
Frequently asked questions
What is the minimum amount to invest in private equity?
It depends on the route. Institutional funds require large commitments; mid-sized club deals and co-investments can start at a few hundred thousand euros.
How long is the money invested for?
In an individual deal, usually three to seven years. In a fund, ten years or more from the initial commitment.
Is private equity suitable for everyone?
No. It suits those with enough wealth to tie up part of it for many years and who can tolerate uncertain outcomes.
