Private equity as an asset class
Private equity offers investors the opportunity to generate attractive returns compared to other asset classes while improving portfolio diversification.
The fundamental difference between private and public equity and the reasons why private equity offers investors the opportunity to generate excellent returns include the following key characteristics
- The long term nature of private equity investments: allowing investors enough time to implement and effect fundamental and lasting change initiatives
- Incentive structures: company executives as well as private equity managers are highly incentivized to achieve attractive returns for their investors
- Corporate governance: the ability for private equity managers to create and/or enhance conditions for their companies to achieve above average rates of growth through active ownership and rapid decision making associated with control investing and
- Legitimate insider information: allowing private equity investors to base investment decisions on a greater depth of information
While the opportunity to generate higher absolute returns is typically considered to be the main attraction of the asset class, the introduction of private equity to a balanced portfolio can also enhance the risk and volatility characteristics of a portfolio.
Investments offer you opportunities, but also involve risks. Your investment profile is the decisive factor. Please discuss these possibilities with your client advisor at LGT.