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How much to invest in private equity

As the private equity market opens up to a much wider audience, the question of the ideal amount to invest is being asked more and more frequently.

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Private equity in vogue

In general, experts recommend that individual HNWI investors allocate between 5% and 15% of their wealth to private equity. However, some more aggressive investors can allocate up to 40% of their wealth to this type of unlisted investment. Private equity is a long-term investment. Individual HNWI investors must be prepared to tie up their capital for several years.

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The Californian pension fund Calpers, which is very familiar with the asset class, having already invested in over 350 unlisted vehicles, is pushing the envelope on unlisted assets: last March, it announced its intention to increase its allocation to private assets from 33% to 40% of its portfolio. But it all depends on the investor and the level of liquidity required. The example of family offices is interesting: according to Preqin's figures, they had an average of 16% of their assets in unlisted assets at the end of 2023, which represents a return to a normative level after a surge to 20% in 2020 and 2021. According to the report The ultra-high net worth private equity investing in 2023 by Campden Wealth and Titanbay, the family offices surveyed would like to increase their private equity exposure to 23% in the future.

Considerations before investing in unlisted companies

Each investor is unique, in terms of his or her level of risk aversion, personal and professional situation, age, and the size, composition or liquidity of his or her assets. To reap the full benefits of this asset class, private investors need to understand and adapt to the way it works. The difference between private equity funds and the mutual funds so familiar to investors is not limited to lack of liquidity. Illiquidity, however, proves to be an ally for an asset class that must imperatively take a long-term view. In addition to selecting and giving access to management teams with an institutional dimension that were previously inaccessible, platforms must provide private clients and their advisors with transparency, monitoring and comprehensive, regular reporting at a fair price.

There is no “standard answer” to the question of the ideal weight that unlisted equities should have within one's allocation. It is essential for the end investor to be accompanied by his financial advisor in building up and developing his allocation. As the family doctor of wealth, it is the advisor alone who has a global vision of his client's assets, projects, personal and family situation, and therefore his needs. All these elements are essential to assess the capacity to bear risk, the type of assets to integrate and the proportion of wealth that can be dedicated to illiquid assets.

This asset class is particularly popular with France's largest family offices...

  • 48 billion: the amount invested in private equity in France by private clients and family offices in 2021.
  • 21%: the share of private equity in family office assets in France in 2022. Source: France Invest & Opinion Way Read also: Unlisted: is there such a thing as good market timing?

About Private Corner

Private Corner, an AMF-approved portfolio management company, provides wealth and asset management specialists with a secure digital investment platform 100% dedicated to unlisted assets. From as little as 100,000 euros, Private Corner provides access to a selection of leading investment funds (private equity, private debt, infrastructure, co-investment, contribution-cession), generally reserved for institutional investors or large families.

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