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Understanding Private Equity

The Private Equity business

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The Private Equity business

Episode

2

2:24mn

Summary

Private Equity is a sector that manages investments in unlisted companies on behalf of mainly institutional capital, having expanded worldwide with over 4,000 management companies and more than $5,000 billion under management. Known as the best-performing asset class over the long term, average annual returns are between 10% and 15%, with some funds exceeding 20%.

Written transcription

Maurice Tchenio: Private Equity is a recent business that I've been lucky enough to know since its beginnings in the 1980s. It involves mainly institutional investors - pension funds, insurance companies, banks and a few wealthy individuals - who wish to invest in unlisted companies, delegating the management of these investments to ultra-specialized management companies known as Private Equity firms. This business, which originated in the United States, has undergone spectacular growth over the past 40 years, both geographically - it is now present in virtually every country in the world, with some 4,000 management companies managing over $5,000 billion in capital - and in terms of the type of companies it targets.

A distinction is made between venture capital funds investing in start-ups, growth capital companies investing in growing companies, and companies investing in leveraged buy-outs (LBOs) of companies of increasing size (up to several tens of billions of dollars) ( buyout ) and turnaround buy-outs. Private Equity is now recognized as the best-performing asset class over the long term, compared with traditional investments in bonds, listed companies or real estate, and the average historical returns for Private Equity, mainly buyout and Growth, are between 10% and 15% per annum. The world's best funds return over 20% a year.

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In this series

9

episodes

The Fundamentals of Private Equity

Frédéric Stolar

Frédéric Stolar

Frédéric Stolar

Frédéric Stolar

What is Private Equity?

Private Equity allows investors to invest in unlisted companies with specialized managers aiming for high returns by supporting fast-growing, well-managed businesses. Unlike the stock market, where judgement is quarterly, Private Equity offers an investment horizon of 5 to 7 years to develop and execute a business plan.

Frédéric Stolar

Frédéric Stolar

Private Equity allows investors to invest in unlisted companies with specialized managers aiming for high returns by supporting fast-growing, well-managed businesses. Unlike the stock market, where judgement is quarterly, Private Equity offers an investment horizon of 5 to 7 years to develop and execute a business plan.

Frédéric Stolar

Frédéric Stolar

The Private Equity business

Private Equity is a sector that manages investments in unlisted companies on behalf of mainly institutional capital, having expanded worldwide with over 4,000 management companies and more than $5,000 billion under management. Known as the best-performing asset class over the long term, average annual returns are between 10% and 15%, with some funds exceeding 20%.

Maurice Tchenio

Maurice Tchenio

Private Equity is a sector that manages investments in unlisted companies on behalf of mainly institutional capital, having expanded worldwide with over 4,000 management companies and more than $5,000 billion under management. Known as the best-performing asset class over the long term, average annual returns are between 10% and 15%, with some funds exceeding 20%.

Maurice Tchenio

Maurice Tchenio

The 4 Private Equity strategies

Private Equity encompasses a range of investment strategies in unlisted companies, from venture capital for start-ups to turnaround funds for distressed companies, with varying risk and liquidity profiles. Growth capital and LBO funds target more mature companies and offer a more attractive risk/return balance, while turnaround funds operate in more complex and risky situations.

Louis Flamand

Private Equity encompasses a range of investment strategies in unlisted companies, from venture capital for start-ups to turnaround funds for distressed companies, with varying risk and liquidity profiles. Growth capital and LBO funds target more mature companies and offer a more attractive risk/return balance, while turnaround funds operate in more complex and risky situations.

Louis Flamand

Value creation in Private Equity

Private Equity creates value through levers such as active governance, alignment of interests, external growth and long-term investment, with proven operational strategies. These levers enable high returns to be generated through organic growth, improved operating margins, the use of financial levers, multiple revaluation and consolidation strategies, moving away from pure financial engineering to focus on concrete, long-term industrial development.

Frédéric Stolar

Frédéric Stolar

Private Equity creates value through levers such as active governance, alignment of interests, external growth and long-term investment, with proven operational strategies. These levers enable high returns to be generated through organic growth, improved operating margins, the use of financial levers, multiple revaluation and consolidation strategies, moving away from pure financial engineering to focus on concrete, long-term industrial development.

Frédéric Stolar

Frédéric Stolar

The greatest risk in Private Equity

Louis Flamand explains that the major risk in Private Equity is team risk. To minimize this risk, Altaroc invests in large funds, with large teams, and ensures that these teams are cohesive and committed to a common vision, while at the same time ensuring fairness in the sharing of interests and the financial involvement of key members alongside investors.

Louis Flamand

Louis Flamand explains that the major risk in Private Equity is team risk. To minimize this risk, Altaroc invests in large funds, with large teams, and ensures that these teams are cohesive and committed to a common vision, while at the same time ensuring fairness in the sharing of interests and the financial involvement of key members alongside investors.

Louis Flamand

Louis Flamand, our Chief Investment Officer, explains the phenomenon of the famous J-curve.

Louis Flamand

Louis Flamand, our Chief Investment Officer, explains the phenomenon of the famous J-curve.

Louis Flamand

Is now the right time to invest in Private Equity?

Frédéric Stolar explains that, in Private Equity, there is no market timing as such, as investments are spread over five years and exits are similar, smoothing out entry and exit points. It's the managers who decide when to buy and sell companies.

Frédéric Stolar

Frédéric Stolar

Frédéric Stolar explains that, in Private Equity, there is no market timing as such, as investments are spread over five years and exits are similar, smoothing out entry and exit points. It's the managers who decide when to buy and sell companies.

Frédéric Stolar

Frédéric Stolar

The advantages of a Vintage offer

The Altaroc offer features a Private Equity investment strategy through vintage funds of funds, providing balanced exposure by investing each year, despite the challenges of rigorously selecting 5 to 7 exceptional funds per year.

Louis Flamand

The Altaroc offer features a Private Equity investment strategy through vintage funds of funds, providing balanced exposure by investing each year, despite the challenges of rigorously selecting 5 to 7 exceptional funds per year.

Louis Flamand

Private Equity as part of a wealth management strategy

Private Equity is one of the best-performing asset classes, but is still under-represented in French portfolios. Altaroc offers Vintage turnkey solutions to democratize access to Private Equity and enable private clients to replicate the strategies of large institutional investors in Private Equity.

Thibaut Mortelecq

Thibaut Mortelecq

Private Equity is one of the best-performing asset classes, but is still under-represented in French portfolios. Altaroc offers Vintage turnkey solutions to democratize access to Private Equity and enable private clients to replicate the strategies of large institutional investors in Private Equity.

Thibaut Mortelecq

Thibaut Mortelecq

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Important disclosures

Performance information is provided for illustrative purposes only. Past performances are not a reliable indicator of future results. Private Equity investments involve a high degree of risk. Potential investors must have the financial capacity and willingness to bear the risks associated with investing in the Funds (including the potential total loss of their capital), as well as, in the case of the Altaroc funds, the lack of liquidity. To find out more, click here.