The Executive Suite: How to Buy Private Equity Shares & Stocks

Saturday, September 28, 2013

How to Buy Private Equity Shares & Stocks

Traditionally investors have held nearly all of their investable assets in traditional asset classes such as stocks and bonds. More and more investors are placing a slice of their portfolio into alternative investments such as private equity for added portfolio diversification. Private equity investments are investments made into a corporation whose ownership shares are not actively traded on public stock exchanges such as NYSE.

Suggestions

Determine the percentage of your portfolio that you want to allocate to private equity. Many professional advisers would recommend 10 to 20 percent of your total portfolio.
Find an investment adviser that will help you shop for a private equity investment. Some private equity firms will create direct accounts but many work solely through brokers.
Consider the sectors you want to invest in. Many firms specialize in a particular part of the economy such as technology or health care. Read the sales literature on the funds you are considering to determine which ones seem to have the greatest potential.
Consider past performance. Look at the firms 3-, 5-, and 10-year track history to get a feeling of what kind of returns their investors have enjoyed. Be careful investing with unproven younger firms.
Write the check. Once you've selected the firm in which you want to invest, there will be a lot of paperwork to complete. Most private equity firms are structured as partnerships, so you will need to complete a lot of forms to make your investment.