What is Private Equity?

Private Equity (PE) refers to investments that are not traded on regulated markets like stock exchanges. Essentially, PE involves investing in private, unlisted companies as opposed to public, listed ones. PE serves as an alternative source of funding for private companies. This broad term encompasses investments in a company's equity and its derivatives, as well as various forms of private debt. Private equity funds provide capital throughout a company's life cycle, from the early stages of a business idea to its maturity. Fund managers often specialize in niches such as venture capital, growth or development capital, buyouts (investing in established companies with proven strategies and cash flows), secondaries (acquiring stakes in ongoing PE funds), and private debt. PE investments are not limited to large companies; firms of any size can be targets. Some funds take minority stakes, while others aim for majority control. Degroof Petercam, for instance, focuses primarily on buy-out funds due to the superior risk-return profile.

Why invest in Private Equity?

The primary reason to invest in PE funds is the potential for superior returns compared to listed equities. PE investments also diversify your portfolio by giving you access to the unlisted segment of the economy. Additionally, investing in a PE fund means leveraging the expertise of the fund manager, who adds value to portfolio companies through strategic input and management decisions. This "proximity" to the investment is a potential advantage, offering a tangible connection to the real economy. Investors may even have opportunities to meet executives or visit the companies in which the PE fund invests.

What could hold you back from investing in private equity?

Returns are not guaranteed, and past performance is only an indication of potential future results. PE investments are long-term and illiquid, requiring a substantial minimum investment, often €250,000 per investment. You need to consult with your private banker to determine if such investments suit your profile and to plan your budget accordingly. It is nearly impossible to resell a PE commitment to third parties. Typically, a PE fund investment is a "buyand hold" commitment. Investing in Private Equity Funds comes with risks, including: Partial or total loss of invested capital Long term investment Illiquidity and restrictions on investment transfer Complex tax structures and potential delays in tax returns Limited information on valuations and prices Higher fees Concentration risk

What makes Private Equity an attractive asset class?

The global private equity market is estimated at several trillion $, with the majority of the investments in North America. At any single point in time, it is estimated that 3 to 4 thousand private equity funds are raising commitments. Degroof Petercam seeks to select the best among them. Investing in PE can be done directly or through PE funds. Entrepreneurs are direct PE investors because they hold unlisted shares in their companies. However, creating a direct PE portfolio is challenging due to the lack of publicly available financial and operational data on unlisted companies. PE funds, managed by professional teams, raise capital from institutional and private investors to follow specific investment strategies and acquire stakes in various unlisted companies. These professionals add value to the management and strategy of portfolio companies. As an investor in PE funds, you benefit from diversified investments across multiple unlisted companies and the expertise of fund managers. The success of a PE fund manager is determined by their knowledge and results, applying a clear investment strategy that targets specific regions, sectors, and company sizes. At the launch of a fund, investors do not need to transfer the entire capital commitment upfront. Payments are made over time through capital calls, which are spread according to investment needs. Some funds limit capital calls to once per year, using bridging loans to finance acquisitions temporarily.

Is investing in private equity right for me?

Investing in private equity is suitable for investors with a higher risk profile who are willing to lock in their capital for a longer period. It offers the potential for high returns but also requires patience, capital, and a good risk tolerance.

What is the minimum investment amount required to participate in a private equity fund through Degroof Petercam?

The minimum investment amount for participating in private equity through Degroof Petercam can vary depending on the specific fund and strategy chosen (often €250,000 per investment). Generally, this amount is higher than for traditional investment options due to the nature and risks of private equity. This is an important consideration for investors looking to take advantage of the benefits of this asset class.

What types of private equity investments exist?

The following types of private equity investments can be distinguished: Venture Capital (VC): Investments in start-ups and young companies with high growth potential, but also high risk. Growth Capital: Investments in more mature companies that need capital to continue growing or expanding, without taking full control of the company. Leveraged Buyouts (LBO): Acquiring a company using a combination of equity and borrowed funds. Often, a majority stake in the company is obtained. Distressed Private Equity: Investments in companies experiencing financial difficulties, with the aim of restructuring and making them profitable again. Mezzanine Financing: A hybrid form of financing that combines features of both equity and debt, often used in acquisitions.

What exclusive investment opportunities does private equity through Degroof Petercam offer that are not available on public markets?

Degroof Petercam provides access to unique investment opportunities in private equity, including stakes in promising non-public companies and funds that are often beyond the reach of public markets, enabling you to benefit from growth opportunities that would otherwise be difficult to access.

How does private equity contribute to the diversification of my portfolio, and what benefits does this offer in terms of risk diversification?

Private equity investments offer diversification by providing exposure to non-public companies that are less correlated with traditional equity and bond markets. Thus, private equity investments can help spread the overall risk profile of your portfolio. Adding private equity to a portfolio can reduce volatility and provide stability during market fluctuations, as these assets are less subject to daily movements in public markets.

What are the main Characteristics of unlisted investing?

Investments in PE funds are long-term and illiquid. Committed capital is used gradually over several years, aligning the interests of fund managers and investors. Valuation typically occurs quarterly or annually. A PE fund's duration averages 10 years, with capital calls usually within the first five years. Exits, or the sale of portfolio shares, also occur gradually, distributing returns to investors. While early exits may happen within the first few years, the fund generally aims to sell all investments within ten years of the initial capital calls. Fund rules may allow for a one- or two-year extension. As an investor, you commit to the entire investment cycle and cannot withdraw your commitment without facing penalties, which could include selling your position at a steep discount. Transfers of your position require prior approval from the fund manager. The timing and amount of capital calls are uncertain. During the investment period (generally the first five years) a succession of capital calls will take place, and you must be able to fund a significant portion (sometimes 20% or more) of your commitment at short notice. It is crucial to plan your budget and schedule with your private banker in advance.

Exclusive Access to Private Equity Investments

Expert selection of

Private Equity Funds

In recent years, private equity has grown in popularity among investors seeking diversification and long-term growth. To take full advantage of this dynamic but complex and risky asset class, expertise, access to the best fund managers and local know-how are essential.

Thanks to the merger with Degroof Petercam Indosuez Wealth Management, our clients can now count on an even stronger offering, combining in-depth market knowledge with international reach. In short: a new reference in private equity.

Read our brochure on Private Equity

Your trusted partner

in a growing sector

Bert D’Huyvetter, Head of Private Assets and Jean-François Becu, Head of Private Equity

It can be a challenge to gain access to the best Private Equity fund managers. Degroof Petercam is your reliable partner in navigating the complexities and opportunities within the Private Equity landscape. We ensure a robust and diversified investment strategy tailored to your needs.

Invest through a fund setup in unlisted companies

Aim for higher returns

Benefit from our expertise

Diversify your portfolio

Commit to long-term investments (7-12 years)

Talk to an expert?

Entrepreneurship is part of our DNA. It drives our clients' success as well as our own. For over a decade, Degroof Petercam has been building strong expertise in offering its clients the opportunity to invest in private equity through partnerships with outstanding fund managers.

Jean-François Becu, Head of Private Equity

Focus on

high-quality

At Degroof Petercam, we focus on high-quality buy-out funds, secondary funds, co-investment funds and growth funds. Further on we have developed expertise in renewable energy. As a regular investor, we enjoy access to top-tier funds and leading fund managers.

Minimum

investment amounts

Private Equity Funds are suited for investors prepared to commit their capital over a long period and willing to accept higher risks. As an experienced and sophisticated investor, you must understand the potential for substantial capital loss. The minimum investment amount for a single fund investment is EUR 250,000, necessitating significant capital for Private Equity investments.

Higher returns,

greater risk

Investing in Private Equity Funds offers the potential for higher returns but also comes with risks, including:

Partial or total loss of invested capital

Illiquidity and restrictions on investment transfer

Complex tax structures and potential delays in tax returns

Limited information on valuations and prices

Higher fees

Comprehensive range of

Private Equity services

Our seasoned team conducts a rigorous selection process to present specific Private Equity investment opportunities, which may be local, regional, or global, targeting SMEs or large companies. Our services include:

Financial and economic analysis

Legal and tax advice

Portfolio monitoring

Assistance with exit strategies

Talk to an expert

Private Equity

explained

Find more questions and answers on the FAQ

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