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Investing
16 May 2019 6 min read

6 things you need to know about private equity

Investing

6 things you need to know about private equity

Thu May 2019 6 min read
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Ever wondered exactly what private equity investing is all about, or how – or whether – you can take part in it? This article will give you all the basics and show you how you can get involved.

What is it?

Private equity investing, simply put, is investing in the future of a business enterprise that isn’t listed on the stock exchange. It’s similar to venture capital investing, but with some significant differences that generally apply to private equity. Here’s how it works – a fund collects money from a bunch of investors, then uses that money to buy interest, often a controlling interest, in a company. A large portion of the time these are mature companies that need some changes made, even if those changes are unwanted or resisted by the current management. The fund uses the money to make these changes, since they have bought a controlling interest, that could include expansion, restructuring, or any number of possibilities. The individual investors are rewarded with returns if the company does better in the future.

Why do people invest in it?

To make money! Just like any investment, PE investing has its risks. But whereas buying stocks doesn’t necessarily provide any assurance of the company moving forward in a better direction, PE investing is based on this assurance. It might work, it might not, but there’s a vested interest in improvement and often put their own people in positions of power in the company to make it happen. And it provides greater returns on average than mutual funds or other structured products when the gamble pays off.

Who is able to purchase private equity investments?

Private equity hasn’t traditionally been accessible to the average retail investor, but the times are changing. In fact, any customers using our app can participate and invest on-app. This provides a wider range of investment options and possibilities to the average investor.

How do you select a good private equity investment?

A good PE investment is usually a mature business with a strong market position, multiple avenues of growth, preferably a strong management team, and favorable industry trends. It’s always recommended to do your own research on any investment opportunity, whether it’s private equity or any other type.

How long do you need to stay invested?

Traditionally a long lock in period of up to 10 years has been a sore point with investors. However an investor using the LU Global app only needs to stay invested for about 9 months to a year. It’s still sometimes true that longer investment periods with private equity can result in better returns, but funds with shorter tenures can still provide returns without having your money tied up for years at a time.

How can you get private equity on the LU Global app?

Simple! The same way you choose any other investment. Just download the app, open your account, top-up your account, and choose the products you want to invest in! Get started today and see how simple it is.

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