In the early years of a private equity fund's life, returns can be negative due to fees, expenses, and investments taking time to mature. This trend creates a "J-Curve" on a fund's performance graph. Hence the common private equity related term ‘The "J-Curve" Effect’.

You should read last week’s newsletter for everything you need to know that happened across IB, AM, S&T, PE, HF & VC most recently.

IN THIS ARTICLE

• Private Equity - What is it? How do investors make money?

• Private Debt - What is it? How do investors make money?

• Private Infrastructure - What is it? How do investors make money?

• Private Real Estate - What is it? How do investors make money?

• Average Returns - Highest to lowest % ranges for each.

• Illiquid Vs Liquid Investments - What’s the difference and why?

PRIVATE EQUITY (GET THE 127-PAGE GUIDE HERE)

There’s More To Private Markets Investing Than Private Equity.

Here's the big 4 explained in basic English:

Private Equity

Imagine being a part-owner of your favourite store. That's what private equity is all about. PE funds invest investor capital to buy and make improvements to companies that aren't traded on the stock market.

They help these companies improve before a big payday by selling them or letting them join the public markets through an IPO (initial public offering).

Private Debt

Ever borrowed money with the promise to pay it back later? That's like private debt, but with large companies.

Investment firms lend money to companies, and these companies promise to pay back the borrowed money along with a little extra as a "thank you."

Private Infrastructure

Countries all over the world have bridges and roads to help people get around. Infrastructure investments make sure they stay strong and safe for everyone to use.

Investors get special rewards from all the people who use these places, like tolls from cars crossing a bridge.

Private Real Estate

These funds allow investors to access special buildings like stores, offices, and homes that aren't traded on the stock market. They can also invest to build new residential housing and commercial building projects.

Profits are generated on the back of rents and the sale of projects that have been developed.

ENJOYING THIS ARTICLE?

Supercharge Your Finance Career In Just 5 Minutes Each Week

Get the weekly email that keeps you updated on everything going on in the world of IB, AM, S&T, PE, HF and VC, for free.

Average* Returns

• Private Equity: 10-20%

• Private Infrastructure: 8-12%

• Private Real Estate: 6-10%

• Private Debt: 4-8%

*Generalised ranges which can be influenced by many factors including risk profile of underlying investments, market conditions, sector-specific factors, geography, etc.

Illiquid Vs Liquid Investments

Lastly, these are long-term 'illiquid' investments. Meaning investor capital is tied up for quite some time (think anywhere from 5 to 10+ years) and is not readily available i.e. 'liquid'.

Given the nature of their liquidity (investors allocating capital to these offerings will be locking up their capital for a long time), these investments offer higher potential returns compared to more liquid investments like money market funds.

The next time you think you're interested in private equity, ask yourself if you have considered the other areas within private markets investing.

GET AHEAD. GET THE GUIDE.

Introduction To Private Equity

REACH 2,000+ FINANCE-FOCUSED 18-34 YEAR OLDS

Get In Front Of Your Target Audience

If you’re interested in advertising with us, send an email over to [email protected] with the subject “Newsletter Sponsorship”.

FREE RESOURCES

Complimentary Guides For Members