¿Qué es el Private Equity y cómo invertir de forma eficiente?
What is Private Equity?
Private equity is a very broad term including all company transactions in which capital is not traded on a public or regulated market.
Funds specialised in this sector are an important source of capital to finance the growth of unlisted companies.
Qualitas Equity Funds acts as a catalyst for SMEs with the greatest potential to find the necessary financing to grow and become leaders in their respective market niches.
Private Equity is the most efficient asset for investing in unlisted companies
Why invest in private equity?
Private equity investment offers the prospect of superior returns compared to any other traditional asset class; such as equities, bonds or real estate.
That is why the capital invested in private equity has increased over the last few years. Everything points to the fact that this growth trend will continue in the coming years.
The percentage of private equity assets in the portfolio of institutional investors such as pension funds, family offices or insurance companies has increased considerably in recent years.
Private equity is the most demanded asset by institutional investors
Why invest in funds of funds?
Most of the benefits of investing in funds of funds lie in the importance of an appropriate diversification level with the aim of reducing risks.
A direct private equity fund has an average of 10/12 portfolio investments, often focused on a single region and/or sector. However, a fund of funds specialized only in the first quartile of the existing funds in the market can consolidate a portfolio of approximately 200 companies with an excellent geographical and sectorial diversification.
In addition, the structure of a Fund of Funds allows certain advantages to be exploited to obtain attractive returns, with an extremely low level of risk.
- Diversification through a large number of companies and geographies
- Access to funds only available to investors with a high minimum investment
- An experienced team dedicated to select the best underlying funds
- Management, administration, analysis, and professional and specialized monitoring of Private Equity
A fund of funds provides maximum diversification, thus minimizing the risk of capital loss. This is evidenced by the fact that no fund of funds in Europe has lost money in recent years, even funds in the lower quartiles have generated consistent returns.
Therefore, it can be concluded that funds of funds are very resilient assets capable of generating attractive returns in adverse market situations
No private equity fund of funds has lost money in the last 20 years
Even in adverse market conditions such as the 2008 financial crisis, funds of funds obtained good returns, reaching, in many cases, double-digit returns.
Private equity funds of funds have always beaten the market
Why invest in a private equity fund of funds?
Private equity funds of funds generate substantially higher returns than other asset categories such as fixed income, while maintaining extremely low levels of volatility.
By giving up a couple of percentage points of return over direct private equity investment, funds of funds manage to reduce the risk of loss to zero and still offer a double-digit net return
How is private equity structured?
There are many different market segments within private equity, with the lower mid market attracting the most interest from large investors.
Currently 58% of the weight of the economy is supported by small and medium sized companies with a value of less than €50 MM.
Meanwhile, only 14% of funds have a clear focus on this market segment.
This imbalance between supply and demand reduces purchase prices, and consequently leverage levels. It also increases the volume of potential opportunities. However, this is where the ability to analyse these companies is crucial, as is identifying those managers capable of doing so and consistently beating the market.
As you can see, the lower mid market is the most profitable and least volatile segment of private equity.
The lower mid market segment stands out as the most attractive private equity segment
