He Private Equityor investing in private capital is a type of investment in companies that do not quote on stock markets. They are a medium and long -term investment alternative to achieve attractive profitability outside the stock market.
Investing in Private Equity implies assuming greater risks, since these investments are not made in regulated markets, but in turn offers the opportunity to bet on business projects with great opportunities for revaluation.
What are private equity funds?
A Private Equity Fund It is an investment vehicle managed by professionals that brings together capital of various investors – mainly institutional – to finance the development and expansion of private companies. These investments can cover different stages of the business:
- Venture Capital (Seed capital and startups).
- Growth Capital (Expansion and consolidation).
- Buy-out (Purchase of companies with growth potential).
- Private debt funds (alternative financing).
Unlike stock exchange, where anyone can acquire shares of public companies, Investing in private capital requires a strategic approach and a long -term investment horizon.
How are Private Equity funds managed?
The managers of these funds identify companies with potential, acquire participations and work in their growth and then sell them to a higher value. This process may take several years and requires specialized knowledge in financial analysis, business strategy and operational management.
Some keys to the investment process in Private Equity:
- Capital capture: Investors compromise their money deep down for a certain period.
- Selection of companies: The fund analyzes investment opportunities in non -sought -after companies.
- Business improvement: Strategies are implemented to increase the value of the company.
- Investment output: The company is sold to another investor, through a merger or through an initial public offer (IPO).
This model allows investors to benefit from the revaluation of companies with high growth potential, but also implies a significant risk due to the lack of liquidity and the duration of the financial commitment.
Main characteristics of Private Equity funds
Investing in a private Equity fund implies understanding its peculiarities:
- Long -term commitment: The average duration of these funds is 8 to 12 years.
- Lack of liquidity: It is not possible to sell the investment immediately, as it happens in the stock market.
- High potential profitability: Historically, Private Equity has surpassed stock markets in profitability, although with greater risk.
- Active management: Managers not only invest, but actively participate in the strategy of companies.
Who can invest in Private Equity?
Traditionally, Private Equity funds were reserved for large institutional investors. However, with the recent reduction of the minimum amount of investment in Spain to 10,000 euros, More and more particular investors can access this kind of assets.
Even so, due to its complexity and temporal horizon, it is advisable to have expert advice before investing in private capital.