Private Equity: Understanding Investment in Private Companies
- Jan 19
- 2 min read
Updated: Jan 20
Private equity, also known as venture capital or capital investment, involves investing in companies that are not listed on public stock exchanges. Unlike traditional stock market investments, it is not about buying shares with a click—it involves taking a direct stake in a company.
This type of investment plays a key role in financing the real economy and is increasingly attracting investors seeking long-term performance.
A Long-Term and Committed Investment Horizon
Private equity is a non-liquid investment, meaning the capital is typically committed for 7 to 10 years.
This lack of liquidity implies:
A long-term investment horizon
A thoughtful wealth management approach
The ability to lock in capital for several years
In return, this patience often allows investors to target higher returns than those typically available in public markets.
What Returns Can Investors Expect from Private Equity?
Historically, private equity has delivered superior long-term returns compared to public markets. On average, it has generated around 12% per year net of fees, depending on the strategy and investment period.
These returns are driven by:
Operational value creation
Business growth and expansion
Lower exposure to daily market volatility
However, past performance does not guarantee future results, and fund selection is critical for success.
What Is Private Equity?
Investing in private equity means supporting private companies, often SMEs or mid-sized enterprises (ETIs). These companies typically have one of the following profiles:
Already profitable
Experiencing strong growth
In need of capital to:
Accelerate development
Fund strategic transformations
Organize succession or acquisitions
Instead of relying on public markets, these businesses turn to private equity funds to support their growth trajectory.
The Role of Private Equity Funds
Private equity funds do more than provide capital—they take an active and strategic role over the long term.
They support companies through:
Targeted financial investments
Strategic decision-making
Mergers and acquisitions (M&A) activities
Operational performance improvements
The ultimate goal is creating value over several years before exiting the investment under favorable conditions.
Private Equity: A Patient and Strategic Investment
Private equity is not a short-term investment. It is best suited for investors seeking:
Exposure to the real economy
Sustainable value creation
Portfolio diversification beyond public markets
It is a patient investment designed for long-term wealth strategy, supporting businesses and contributing to economic growth.
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