How to invest in private equity - BVCA admin

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What sort of private equity funds are available for investment? See the section on "Methods of investing in private equity" which will give you some pointers. Different pension funds will have different requirements and resources. Should investment be in more than one fund? A portfolio of private equity fund investments may be advisable in order to give a spread, as with investment in any other asset class. This can be achieved either by investing in more than one fund or by investing in a fund of funds. Why invest in private equity? With suitable diversification, you can achieve long-term superior returns.
Appendix 1 - Private equity terms and definitions The term "private equity" is the term generally used in Europe to cover the industry as a whole, both buy-outs and venture capital. "Venture capital" is a subcategory covering the seed to expansion stages of investment. Private equity describes equity investments in unquoted companies often accompanied by the provision of loans and other capital bearing an equity type risk. Below are descriptions of the different stages of private equity investment. Types of private equity Buy-in management buy-out (BIMBO) Provision of equity capital to enable a company's management to acquire the business they manage with the assistance of some incoming management. Institutional buy-out (IBO) Provision of equity capital to enable a private equity firm to acquire a company, following which the incumbent and/or incoming management will subscribe for or otherwise acquire a stake in the business. Management buy-in (MBI) Funds provided to enable an external manager or group of managers to buy into a company. Management buy-out (MBO) Funds provided to enable current operating management and investors to acquire an existing product line or business. Public to private (PTP) The purchase of all of a listed company's quoted shares using a special purpose vehicle funded with a mixture of debt and unquoted equity. Refinancing bank debt To replace or reduce a company's level of gearing. Replacement capital Equity capital which allows existing equity investors to buy back, replace or redeem their shareholding. Rescue/turnaround To provide equity to finance a company in difficulties or to rescue it from receivership. Secondary purchase Purchase of existing shares in a company from another private equity firm. This is often done when a private equity manager wishes to sell his stake in a company to allow him to wind down a mature fund at the end of its life, or from another shareholder or shareholders. Venture capital • Seed Provision of equity capital to allow a business concept to be developed, perhaps involving the production of a business plan, prototypes and additional research, prior to bringing a product to market and commencing large-scale manufacturing. • Start-up Financing provided to companies for use in product development and to fund their initial marketing. Companies may be in the process of being set up or may have been trading for a short time, but may not have sold their product commercially. • Other early stage Provision of equity capital to initiate commercial manufacturing and sales in companies which have completed the product development stage, but may not yet be generating profits.
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