Non-listed investments and private equity: where to put your money in 2025? This is the question on everyone's lips as the end of the year approaches. In this final 2024 edition of Unquoted under the microscope, we share with you the key points to bear in mind for investors interested in unquoted assets in 2025.
Are you looking to invest in private equity in 2025 and want to find out more about the prospects for non-listed investments? Ask our experts for advice:
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Favourable outlook for private equity in 2025
Private equity has been particularly in the news this year with the introduction of the Green Industry Act, which aims to facilitate access to private equity for French savers by adding a proportion of private assets to the discretionary management of life insurance policies and retirement savings plans. Economic and political uncertainty could create opportunities in the unlisted sector, particularly in resilient or counter-cyclical segments. In this context, unlisted assets such as private equity, infrastructure and private debt illustrate their diversification potential in their ability to outperform traditional financial markets, particularly if equity market volatility persists. In 2025, the non-listed market should continue to grow, driven in particular by increased demand for diversification and sustainable performance. Rigorous selection of assets and managers, as well as the integration of ESG criteria, will become essential, as will transparency, in response to the high and legitimate expectations of private investors. Quality funds, tailored to wealthy investors, will stand out in a more demanding environment.
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There is no market timing
Investors accustomed to the stock market are often preoccupied with finding the right entry point, fearing that they will miss the next upward movement and be exposed just before a sharp fall. With unlisted assets, there is no need for this bias. This is a long-term asset class, where there is no daily valuation of assets. Admittedly, transactions are not carried out at a price that is totally independent of stock market fluctuations, since the valuation of listed companies provides points of comparison. However, the sums committed to an unlisted fund are not invested immediately and will generally be deployed over a period of 4 to 5 years. This gives the fund manager considerable latitude in deciding whether or not to invest in the opportunities that are being studied, and thus to pass on periods when valuations seem excessive. This natural smoothing of entry points is also an opportunity for investors: it allows them to build up their allocation gradually, by spreading it across the different strategies offered by private assets.
More than market timing, what really matters when you invest by agreeing to tie up your money over the long term (generally around ten years) is gaining exposure to companies that are leaders in their markets, and therefore have significant growth potential through the cycles.
So it's not so much the right time as the right manager! Assessing the teams involved in fundraising is crucial. It is essential to document the way in which they have delivered performance, and to analyse how they have behaved in tense market phases.
There is no such thing as ‘ideal weight’.
Experts recommend that individual HNWIs allocate between 5% and 15% of their wealth to private equity. However, some wealthier investors with greater savings capacity and risk appetite allocate up to 40% of their wealth to this type of investment, a phenomenon widely observed in the US where the private asset market is more mature.
Each investor is unique, in terms of their investment horizon, risk appetite, personal and professional situation, age, and the size, composition and liquidity of their assets. To make the most of the advantages of this asset class, retail investors need to understand how it works, adapt to it and, above all, seek professional advice before making any investment decision. This will help them to analyse and control the risks associated with the asset class.
Diversification is also key
As with listed assets, the adage about not putting all your eggs in one basket remains valid here. It is through good risk diversification that we can hope to generate attractive and relatively consistent returns over the long term. The expansion of the unlisted universe and the professionalisation of the industry have brought granularity to the market and been accompanied by increasing segmentation. Diversifying with private equity in 2025 means not only entrusting your money to different managers, but also allocating it to different types of strategy, different vintages, different geographies and even different types of asset.
The mid-cap market (between €150m and €500m enterprise value) offers great adaptability in a changing economic environment. In addition to continuing to invest in private equity in 2025 and in non-listed companies (and more specifically in expansion capital and buyout capital), where returns have always been well above those of traditional asset classes, it is important to supplement this allocation with other strategies to which private clients are still under-exposed. We can, for example, build a core portfolio with co-investment funds (a strategy in which private equity managers invest alongside other large funds) or by choosing teams specialising in secondary private equity strategies. The latter option provides access, at attractive prices, to more mature and highly diversified portfolios. This accelerates the return on investment and gives us greater visibility over the assets. In addition, adding pockets invested in infrastructure or private debt, for example, enables diversification into assets offering stable returns and moderate risk.
Support is essential
When it comes to unlisted investments, the notion of support is crucial, at every level. Financial advisers and their clients need partners such as investment platforms dedicated to unlisted assets with sufficiently detailed knowledge of private markets to help them effectively select the best strategies and, above all, to enable them to build a portfolio of private assets in line with their existing wealth, their investment horizon and their appetite for risk in particular. There is a great deal of added value in being able to identify funds that are in the process of being raised, to understand in detail what type of companies they are going to finance (sectors, geographies, company sizes, stage of development of the companies financed) and then to assess the relevance of the strategies to be proposed to financial advisers in line with the specific needs of their clients. The devil is sometimes in the detail, and some management teams are likely to open up to private clients for the wrong reasons, such as difficulties in raising funds from institutional investors and large families. The analysis of a market expert is essential to make the right selections.
We can't stress this enough: above all, it is essential for the end investor to work with his financial adviser to build up a balanced, diversified allocation of private assets over the long term. As the ‘family doctor’ of wealth, it is the advisor alone who has an overall view of the assets, projects, personal and family situation, and therefore the needs, of each of his or her clients. All these elements are essential in assessing the capacity to bear risk, the type of assets to be included and the proportion of wealth that can be dedicated to illiquid assets.
Depending on the case, you may be able to defer capital gains tax on the sale of a business.
Investing in an unlisted fund eligible for the scheme codified in Article 150-0 B ter of the French General Tax Code offers the investors concerned a dual advantage: tax deferral on capital gains on disposal and access to growth opportunities in dynamic SMEs. By reinvesting the gains from the sale of a company in an unlisted fund eligible for this scheme, investors benefit from a tax deferral while diversifying their portfolio into assets with yield potential. This scheme is an interesting asset-planning tool that allows investors to benefit from the dynamism of unlisted companies. However, it is vital to understand the risks and conditions associated with these investments. It is advisable to consult a financial and/or tax adviser for personalised advice before investing in private equity.
