Private Equity: Episode 7 - How to Invest in Private Equity Funds?

In Episode 5, we saw that the goal of Private Equity is to finance the growth of companies, with each specialty covering different stages of that development. But as an investor, how can you access Private Equity?

There are two main options: invest directly or via funds.

The first option, direct investment, involves investing directly in companies. In practice, this approach is nearly impossible for individual investors due to the substantial financial resources required, and this also comes with a high-risk level.

The second option, fund investment, allows you to spread this risk. By investing through a fund, the risk is shared with other investors, and it’s further mitigated by diversification, as the fund invests in multiple companies at once. The gains from some companies can compensate for the losses from others.

There are two main ways to invest in funds: through fund-of-funds or directly in the main fund.

• Fund-of-funds invest either in a single fund, known as a master fund, or in multiple investment funds. The teams behind each of these then deploy their investment strategies.

Now, how do you access Private Equity funds? Again, several options exist:

1. Via life insurance, which offers a solution with guaranteed liquidity, but typically involves higher fees.
2. Through Retirement Savings Plans or Employee Savings Plans.
3. Directly, with or without intermediaries such as wealth management advisors.

It’s up to you to choose the option that suits you best, while keeping in mind the potential stacking of fees involved.

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