Publicy listed private equity (PDF)

Seminar paper from the year 2018 in the subject Business economics - Investment and Finance, grade: 2,0, International School Of Management, Campus Frankfurt, language: English, abstract: In the following, I will point out the different business models, strategies and opportunities for private individuals to invest in the industry. The methods and analysis that are used in this paper are aimed to explain traded private equity to private individuals.

In recent years, the term "private equity" has become increasingly important in the financial industry due to strong returns and growing revenues. Not only was the industry able to improve its reputation, but it also grew to become more and more interesting for investors, even in risk-averse countries like Germany. The ability of the private equity industry to achieve high returns was driven by different factors, such as the high incentives for both private equity portfolio managers and for the operating managers of businesses in the portfolio. On the other hand, the aggressive use of debt provided by banks with low-interest rates helped the industry to invest with a high leverage ratio. While the industry was able to use financing and tax advantages, which are not open to other companies, they used the advantage of being less regulated.

Additionally, the high confidence in the industry is a reason for the growing interest. A recent survey of institutional investors found that 49 percent of markets analysts expect private equity to outperform the public equity market by a strong 4 percent per year or more. In addition, 45 percent believe that private equity will outperform the public equity market by 2 to 4 percent per year. Because of this high confidence within the industry, private equity has grown to become one of the most attractive and an alternative investment opportunity.

Especially in regards to the financial market with low-interest rates and high multiples in the public equity market, there are reasons as to why private individuals are seeking alternative investment opportunities. Due to a growing economy, private equity funds have had years of strong growth and have been the biggest winner in the ten-year cycle since the global financial crisis. The global private equity industry still has more than US$v3.1 trillion in assets under management with US$ 1.1 trillion in cash, or so-called 'dry powder', to invest, based on the research of data provider Preqin. While looking at the industry statistics, it is apparent that private equity is already on the same path that they have been on prior to the financial crisis that took place in 2007.