Key points for investing in non-listed assets.

We are an independent asset management company whose ambition is to institutionalize access to unlisted investment. If you are a private investor or wealth management professional, please contact us to find out more about our solutions for investing in unlisted assets (private equity, co-investment, infrastructure, private debt).

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Unlisted assets gain in popularity

Over the past few years, private equity and other unlisted asset offerings aimed at wealthy clients and even the general public have multiplied. In the first half of 2023, capital raised by French players in this sector from individuals, private banks and family offices rose by 39%, according to France Invest. This enthusiasm contrasts with the cautious attitude of institutional investors over the same period. This trend, as well as the novelty of certain offers, should encourage private investors and their advisors to remain vigilant. Interest in private equity is undeniable: according to France Invest, this asset class generated an average annual return of 14.2% between 2013 and 2022.

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Specific investments

The first question you need to ask yourself is how much of your wealth to allocate to unlisted assets, an inherently illiquid asset class. Of course, there is no universal answer, as each investor is unique: risk profile, personal and professional situation, age, asset composition and liquidity. That's why it's so important to be accompanied by a wealth management advisor or banker with a global vision. To make the most of unlisted assets, individuals need to understand and adapt to the way they work. The difference with more familiar funds such as UCITS is not limited to illiquidity. The latter can even be an asset for investments requiring a long-term perspective. Private equity funds generally invest over a period of 4 to 5 years, enabling smooth entry points and the integration of several economic cycles. This type of strategy, common for institutional investors, is essential for private investors.

Furthermore, investment platforms must guarantee transparency, monitoring and regular reporting, in order to preserve the value created by the management teams. Thanks to digital technology, costs can be optimized, with human resources concentrating on high value-added tasks.

Investor education is essential

Rather than talking about the “democratization” of unlisted assets, it would be more accurate to refer to the institutionalization of practices aimed at well-informed investors, with an investment capacity of at least 100,000 euros. For more mainstream investors, there are alternative solutions such as “evergreen” funds. Unlike traditional private equity funds, these have no maturity date and remain open to subscriptions and redemptions at all times. These proven, mature strategies offer investors a degree of liquidity through regular sales of portfolio assets. However, care must be taken to ensure that this liquidity does not diminish performance drivers or result in excessive fees. The example of FCPI, FIP and ISF holdings, which were among the first private equity vehicles accessible to the general public, shows that high fees and poor-quality investments can mar performance, despite tax advantages. If we are to win the confidence of investors over the long term, we will have to do better.

Is now the right time to invest?

Performance in unlisted investments varies considerably from one manager to another, and in a context of rising interest rates, selectivity becomes crucial. Indeed, it is necessary to assess whether the time is right to adopt a particular strategy. Market timing in private equity differs from timing in the stock market: a private equity fund invests progressively over several years, smoothing out the vintage effect, rather like programmed investment. However, investors need to diversify their investments between different vintages and management teams. The real issue is not whether it's the right time to invest, but rather which strategies offer the best risk/return balance. It is essential to ensure an alignment of interests between investors and funds, by carefully evaluating the performance of management teams in tense market contexts.

Segments to focus on

The MidCap segment offers great flexibility in an unstable economic environment. In addition to expansion and buyout capital, we recommend diversifying into other strategies that are still under-exploited by private investors. After interest rates rise in 2022, inflation is likely to remain higher than pre-crisis levels. In this context, assets such as infrastructure and private debt seem appropriate. Unlisted assets should not be seen as a homogeneous class, but rather as market segments and management teams offering the best risk/return ratio. Transparency and balance are the keys to a successful allocation.

• By Estelle Dolla, President and co-founder of Private Corner.