Private Equity

The term private equity refers to an equity investment in non-listed companies. Regularly, this investment is not direct but through private equity funds. These identify companies, carry the interests of their investors, and manage the eventual sale of the participations.

The primary focus of private equity funds is a medium to long-term growth of the value of their investments, as returns to their investors usually materialize only upon exit of their shareholdings. Normally, portfolio companies do not distribute profits, as free cash flows are used for debt repayments and strategic investments.

A private equity fund of funds is an investment vehicle that invests in several private equity funds. This structure enables investors to indirectly participate in large number of companies. As a result, this diversification reduces investment risks. Fund of funds managers with superior expertise might be able to perform a better selection of private equity funds which would lead to higher returns.

Fund of funds offer a better access to
private equity for smaller investors

Institutional investors are the main capital allocators to private equity funds. For several decades, these investors have appreciated excess returns of private equity compared to traditional asset classes such as shares, bonds, gold, and real estate. As a result, institutional investors constantly allocate significantly to the asset class private equity.

However, commitments to individual private equity funds entail higher risks compared to a broadly diversified share investment. Typically, a private equity fund invests in only in 8-12 companies throughout its investment period of 3-5 years. To diversify risk, institutional investors continuously commit not only to one private equity fund but to a larger number. Very large institutional investors add direct and co-investments to their portfolios.

The private equity market is characterized by numerous market practices and conventions, making it difficult for smaller investors to invest on a well-educated basis. Moreover, private equity funds often only accept institutional investors due to regulatory requirements and require minimum commitment amounts of more than 5m EUR.

Smaller
investors

(AUM < 500 Mio. EUR)

Larger
investors

(AUM < 5 Mrd. EUR)

Very large
investors

(AUM > 5 Mrd. EUR)

Due to market practises, a lack of expertise and high minimum commitments, direct investments in private equity funds are not always feasible for smaller investors. To achieve a meaningful diversification and access to high-performing private equity fund managers, they should turn to fund of funds.

Access to high performing private equity funds
through REIA Capital

the REIA Capital team consists of seasoned private equity industry insiders
a diversified private equity portfolio can be accessed with a relatively small minimum commitment
two tax structures address different investor requirements

Fund of funds offer a better access to private equity for smaller investors

Smaller investors

Larger investors

Very large investors

Access to high performing private equity funds through REIA Capital

reiaaccess

reiacockpit

Fund of funds offer a better access to
private equity for smaller investors

Smaller
investors

Larger
investors

Very large
investors

Access to high performing private equity funds
through REIA Capital

reia
access

reia
cockpit