Private equity explored

It’s the second largest investment company sector, with total assets of £14.5 billion (to 31 January), strong long-term performance and diversification benefits versus broad equity indices. Nevertheless, Private Equity remains one of the least understood investment company sectors.

To help advisers and other investors improve their understanding of private equity, the Association of Investment Companies (AIC) has produced a series of videos with investment company managers for the AIC website. The videos explain the types of businesses private equity investment companies invest in, define key terms such as IRR and carried interest, and answer the broader question of “What is private equity?”.

In addition, the AIC has produced an online training course on private equity investment companies, offering 60 minutes of structured CPD accredited by the major professional bodies.

The first private equity investment company was launched in 1976, giving individuals access to a diversified portfolio of unquoted companies. There are now 22 private equity investment companies. The sector has outperformed the FTSE All-Share over one, three, five and ten years, delivering total returns of 12%, 57%, 98% and 112% respectively, versus 11%, 27%, 50% and 98% for the index.

Ian Sayers, Chief Executive of the Association of Investment Companies said: “Private equity investment companies provide a way into an asset class which is normally impossible for individual investors to access. But understanding private equity isn’t always easy, because it has its own language, investment process, and even ways to measure performance. That’s why the AIC has launched this education and training programme to help advisers understand the sector better and consider whether private equity investment companies could form part of clients’ long-term portfolios.”

The video series is aimed at both individual investors and advisers, and can be accessed on the AIC website and YouTube channel, as well as via an online publication, ‘Exploring Private Equity’ which includes additional comments from private equity investment company managers.

The online training course on private equity investment companies is available via the AIC’s Financial Adviser centre within the Learning Zone online training area. Advisers will need to log in or register to access the course, which takes less than a minute.

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Notes

1. Performance data is to 31 January 2018 based on the last official close price at the month end, on a % share price total return basis. No expenses taken into account. Source: Morningstar.
2. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment.  Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs.  The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 347 members and the industry has total assets of approximately £174 billion.
3. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance.  The value of investment company shares, and the income from them, can fall as well as rise.  You may not get back the full amount invested and, in some cases, nothing at all.