An Introduction to Private Equity Investing
Private equity continues to play a significant role in portfolio management
for larger investors. It is widely used by institutional and ultra-high net worth investors with a desire for enhanced returns and increased diversification. Limited historical data and a lack of widespread adoption of the investment strategy have led to an incomplete understanding about private equity in the broader marketplace. As the private equity industry evolves, we believe there will be more opportunities for a broader range of investors to participate in high quality private equity investments.
In this paper we will first go through a broad overview of private equity and private equity strategies, review the historical returns at a high level, take a deep look into how private equity managers make money, discuss the typical profile of private equity investors, talk about the various ways investors can access private equity, and look into the mechanics of private equity investing including fund structures, lifecycle and fees. We will explore some of the challenges of gaining and maintaining a private equity target allocation. Finally, we share the story of the Johnsons and how they turned IRR into ROR through a private equity program.