Historical Performance and Benefits

Generated 12.1% annualized returns versus 9.1% for S&P 500 historically Outperformance from illiquidity premium, skilled management, and less competition Provides diversification beyond public equities across multiple business sectors Less volatile during market turbulence due to long-term focus

Types of PE Strategies

Buyout strategies use leveraged buyouts combining equity investment with debt Growth equity targets rapidly growing companies preparing for IPO or sale Distressed investments focus on struggling companies near bankruptcy for turnaround Strategies vary by geography, sector, company size, and concentration

Investment Structure Options

Traditional funds require 10+ year lockups with high investment minimums Evergreen funds offer potential earlier liquidity with lower minimums required Fund of funds provide diversification but charge two fee layers Direct transactions offer lower fees but require high expertise and capital

Major Risks and Downsides

Illiquid investments locked up for 10+ years with difficult valuations Leveraged strategies amplify both upside and downside investment potential Higher interest rates may reduce future returns compared to historical performance Complex tax filing requirements with K-1s and multiple state filings

Fee Structure Considerations

Typical 2% management fee plus 20% performance fee structure Fund of funds add additional fee layer reducing net returns PE must outperform public markets significantly to justify higher costs Direct transactions generally offer lower or no fee alternatives

Only suitable for high net worth investors with long-term liquidity horizons Offers diversification and higher return potential but requires accepting illiquidity risk Choose investment structure based on expertise level, capital availability, and objectives Consider fees, tax complexity, and correlation risks before committing capital

Primer on Private Equity

Curated by: Rubric Advisors

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What is Private Equity?

Equity investments in private companies with growth and exit potential
Active ownership approach with value-add initiatives like acquisitions and improvements
Access to 81% of companies with $100+ million revenue unavailable publicly
Requires specialized management and higher costs than public market investing

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What is Private Equity?

Historical Performance and Benefits

Types of PE Strategies

Investment Structure Options

Major Risks and Downsides

Fee Structure Considerations

Key Takeaways

Related Topics

Introduction to Alternative Investments

Investing in Venture Capital

Fund of Funds: Diversified Access to Alternative Investments

What is Private Equity?

Historical Performance and Benefits

Types of PE Strategies

Investment Structure Options

Major Risks and Downsides

Fee Structure Considerations

Key Takeaways

Related Topics

Introduction to Alternative Investments

Investing in Venture Capital

Fund of Funds: Diversified Access to Alternative Investments