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Exploring private equity

26 February 2018

AIC launches educational video series on private equity investment companies.

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

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

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. Over 25 years to the 31 January 2018, the performance of the sector has been strong, with a £100 lump sum investment now worth £2,824.

Performance over the shorter term has also been good, with a £100 lump sum investment growing to £157 over three years, £198 over five years and £212 over ten years (the equivalent figures for the FTSE All-Share are £127, £150 and £198). Nevertheless, the sector trades at a 14% discount.

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. The AIC has produced this series of informative videos on private equity with the aim of helping investors further their understanding of the sector and to help them consider whether a private equity investment company might be right for their portfolio.”

Alongside the AIC website and YouTube channel, the videos can also be accessed by an online publication, ‘Exploring Private Equity’, which is accessible to all investors and includes additional comments from private equity investment company managers.

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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.

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Annabel Brodie-Smith
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