Benefits of Private Equity for a Portfolio

Private equity (PE) has long been a key holding for institutional investors, but it’s also gaining popularity among high-net-worth individuals (HNWIs) looking to diversify their investment portfolios.

So what is Private Equity?

Private equity is an equity holding in a business that is not listed on a stock exchange.

While private equity is typically associated with longer holding periods and minimal liquidity, its potential benefits often outweigh the challenges, making it a valuable addition to a portfolio.

One of the main attractions of private equity is the opportunity for high returns. Private equity investments often outperform public markets due to the hands-on management style that comes with buying a controlling stake in a company.

Private equity investment managers actively work to improve the operations, strategy, and overall value of the businesses they invest in, leading to higher profitability and, ultimately, higher returns for investors. This active management approach allows investors to capitalise on the potential for substantial growth in companies that are often undervalued or overlooked in public markets.

Private equity also offers diversification benefits. Unlike publicly traded shares, which are subject to daily market fluctuations, private equity investments are typically held for longer periods (often 5 to 10 years) and are not influenced by short-term market movements. This helps smooth out the performance of a portfolio over time.

Another advantage is access to exclusive opportunities. Private equity investments often involve niche industries, or specialised sectors that aren’t available through public markets. By investing in these high-growth areas, High Net Worth Individuals can gain exposure to unique opportunities.

While private equity requires a longer-term commitment and may come with higher risk, the potential for high returns, diversification, and access to exclusive investments make it an appealing option for personal investment portfolios, especially for those seeking to grow and preserve wealth over time.

At Hewison Private Wealth we have unrestrained access to various investment opportunities and our Investment Committee undertakes significant due diligence to ensure our clients are offered access to the best private equity investments in the market.