- Access to Private Equity: Opportunities to invest in private equity funds have traditionally been available to well connected, very large institutions. Listed private equity companies are available to retail investors and institutions of all sizes with low minimum investment amounts required.
- Access to many of the best managers: As a result of the investment banking and initial public offering process, it is typical to see only the best private equity companies able to become public.
- Diversification: A traditional private equity fund may invest in less than ten companies and are often concentrated by industry, stage of investment and subject to vintage year risk. By owning a basket of listed private equity stocks, investors can have exposure to hundreds of companies across various industries, countries, stage of investment (early, mid, late) and reduce exposure to the ‘J curve’ effect (the point where traditional private equity funds reach breakeven).
- Investment Horizon: Private investment funds or partnerships typically have a fixed life of 8-12 years. Listed private equity companies are perpetual investment vehicles with no set life. Therefore, investments and liquidity decisions are based on the goal of maximizing long term return for shareholders.
- Liquidity: Listed Private Equity companies are traded on public
markets and offer a high level of liquidity whereas private equity funds
are typically purchased at the beginning of the fund's life. Investors
in traditional private equity funds are usually paid back through
distributions over the life of that fund. Additionally,
the structure of traditional private equity funds makes
withdrawing an investment prior to the end of the fund's life difficult.
- Long-term Investment: Unlike private funds which have a
pre-determined life span that often requires them to distribute proceeds
at set points in time, listed private equity companies choose to
re-invest or distribute proceeds from liquidated investments based on
current market opportunities.
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- Pricing: Private equity funds and partnerships are typically priced quarterly and usually take 3 months for valuations/prices to be determined. Pricing of investments within private funds are
generally not scrutinized to the same degree or held to the same standards as publicly traded private equity companies. Within private funds there is great resistance to quickly mark investment values upward or downward.
- Reasonable Fees: Managers of private equity funds typically charge fees based on total committed capital or fund size regardless of whether investments are made and are not as impacted by performance of investments. Listed private equity companies typically have tiered fee schedules based on success of the holding company, performance of portfolio investments, and/or the amount invested.
- Transparency: Public companies are required to disclose financial conditions and their investments. Activities of listed public companies and estimated values of investments can be observed on a timely basis.
- Yield: Many of these public companies return investment income, dividends and interest to investors while retaining proceeds from liquidated investments.
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