Why Invest In
Listed Private Equity
Private equity has typically provided better returns than those offered by listed equities, albeit with higher risk. Private equity funds generate these returns using the skill of the managers, leverage and better pricing available in private markets.
Investors seeking these superior returns have traditionally gained exposure to private equity through closed-ended, unlisted funds. This method of investing has a number of drawbacks, often making it suitable for only the largest investors with long investment timeframes.
Listed Private Equity (LPE) can provide investors with the superior returns generated by private equity investments, but with several advantages over investing in unlisted funds.
The advantages of Listed Private Equity include:
LPE securities can be freely bought and sold on major stock exchanges, providing ready liquidity for investors. By contrast, interests in unlisted funds are difficult and costly to buy and sell through one-off transactions.
Immediate investment and diversification
Typically only the largest institutional investors have the resources to build out a diversified portfolio of private equity funds, and even then it can take years to achieve. A portfolio of LPE securities can provide an instant portfolio of private equity interests, diversified by geography, deal stage, vintage year and manager.
Investments in unlisted private equity funds typically experience negative or low returns in the first few years of a fund’s life, with fees and costs outweighing returns: an effect known as the “J-curve” describing the shape of the graph when plotting returns over time. An LPE fund can reduce this effect because the underlying portfolio will typically comprise a range of existing investments that are at differing stages of maturity (much like a secondary transaction).
Because the LPE sector is an under-researched investment area, LPE entities can often trade at a material discount to their net asset backing. This can provide attractive opportunities for knowledgeable investors.