What Does Investing in Private Equity Really Mean for Investors?
- Callum Dunbar
- Nov 14
- 2 min read
When you talk about investing in shares, most people think of companies listed on public stock markets. But there’s a less visible, higher-stakes world beneath that: private equity. At Cleveden Park Wealth, we believe it’s worth understanding what this asset class can offer and whether it’s appropriate for you.
What Is Private Equity?
Put simply, private equity involves investing directly in private companies – ones that aren’t listed on stock exchanges. These can be start-ups (venture capital), more mature businesses seeking growth capital, or full buy-out targets.
Private equity firms often take an active role in managing the business: improving operations, governance and strategy to boost value before eventually exiting their investment via a sale or public listing.
Why Might Private Equity Matter to You?
Here are some of the potential benefits:
Broader opportunity set: Private markets cover thousands of companies not available on public exchanges from innovative start-ups to specialist businesses.
Diversification potential: Because private equity behaves differently to public markets, it can offer a route to diversify your portfolio’s risk-profile.
Possibly higher returns: Historically private equity has often delivered stronger long-term returns than public markets though past performance isn’t a guarantee.
Less short-term noise: Since private companies aren’t priced daily, they aren’t subject to the same short-term market swings as public shares.
So What’s the Trade-Off?
It isn’t all upside - there are crucial considerations:
Illiquidity: Private equity is a long-term commitment. Your money may be locked up for many years.
Higher risk and variability: Especially for early-stage (venture) investments, the risk of failure is significant.
Access and minimums: Some private equity funds require large initial investments or are only available to more experienced investors.
Fee structure and transparency: Because the vehicles are less regulated and less liquid, costs and valuations can be more complex.
How to Approach It Sensibly
If you’re wondering if private equity might suit part of your portfolio:
Check your time horizon: Are you prepared to commit capital for several years?
Review your risk tolerance: Do you accept higher risk in return for potentially higher reward?
Keep it appropriate: Private equity should play a role, not be the entire strategy.
Get qualified advice: Because the nuances matter, specialist input helps ensure it fits your overall plan.
Final Thoughts and Next Steps
Private equity is fascinating but it’s not for everyone. At Cleveden Park Wealth, we help clients assess whether it might play a part in their long-term strategy and ensure any such decision sits alongside pensions, investments, and broader financial planning.
Get in touch today if you’d like to explore whether private equity (or any alternative investment) could align with your goals.