Alternative investments
Alternative investments
Podcast
28.9.2023
If you want to position your portfolio securely today, you can't do without private equity can hardly avoid private equity. The asset class has been particularly popular in recent years, not least because it has outperformed equities, especially in times of crisis. This is a development that many family offices were quick to capitalize on, investing significant proportions of wealth in this investment category and continuing to do so.
However, not every fund is suitable for every investor. Instead of a one-size-fits-all solution, the private equity sector also has various sub-categories with significant differences. So what should you look out for before making an allocation? In the following, we would like to give you an initial insight into the world of these alternative investments based on FINVIA investment solutions.
Single funds are the best-known type of investment in private equity and are therefore true classics. With them, investors invest from €200,000 via a renowned manager such as CVC, Lexington or Genstar. Their usual term is 10 years - while the capital is typically drawn down in stages over the first 5 years, the majority of distributions are made between years 4 and 8.
Basically, such a fund always follows a defined strategy according to which it purchases, develops and increases the value of the companies in its portfolio. The focus can be on particular growth phases, regions, sectors and many other factors.
This high degree of specialization makes the single funds particularly attractive if you are an advanced investor and want to set specific priorities in your portfolio. For example, if you attach importance to focusing on companies in different sectors, for example in Europe, this is the perfect opportunity for you.
But you can also benefit from subscribing as a newcomer. The high degree of individuality of the funds allows you to develop in almost any direction. However, you should always ensure that you are diversified. FINVIA helps you to strategically allocate your intended wealth to different funds. If you would like to create such a portfolio, you should plan a target volume of at least three to four million euros in order to achieve an ideal positioning.
PE Selection is a so-called fund of funds. This means that instead of investing in a portfolio of attractive companies, it invests in a selection of different single funds, which in turn acquire companies. Funds of funds also follow a precisely defined strategy. Parameters such as term, minimum investment amount and conditions correspond to those of the individual funds.
PE Selection is a fund of funds set up by FINVIA itself and launched annually. With 6 - 10 target funds per year, it covers the most important private equity markets, enabling investors to achieve significantly greater diversification per subscription.
This makes it particularly interesting for newcomers who want to maximize the efficiency of each investment. Instead of allocating an individual fund with €200,000 , you can use PE Selection to invest the same amount in a portfolio of selected funds. This not only simplifies the creation of a stable portfolio, but also its administration. Despite its broad diversification, the fund of funds is treated as an individual investment for tax and legal purposes and only capital calls and repayments from one fund need to be processed
These advantages are also of interest to other target groups. For example, more experienced investors like to use funds of funds as the basis of their existing asset structure.
When looking at standard private equity products, the question often arises as to whether they always have to be tied to long terms and investment and distribution phases. In fact, this is not the case, as the example of PE Perpetual shows. Similar to PE Selection, it is a fund of funds and can be subscribed from €200,000 , but is subject to significantly different conditions.
The term is 15 years, but it offers investors far more flexibility in many areas than its illiquid counterpart. For example, the investment can be made once a month and is immediate - the capital is therefore called up directly and not gradually by the investor. The same applies to the payout, which is made in full. After the minimum commitment period of 36 months has expired, up to 20% can be requested each year. However, this liquidity option only applies if returns are not too high, in order to protect existing investors from liquidation constraints.
Similar to the PE Selection, the PE Perpetual is also attractive for newcomers who want to achieve greater diversification per subscription. In addition, however, it is above all its pronounced flexibility that makes it relevant for all target groups. On the one hand, you can use it to slowly "feel your way" into the private equity sector and its illiquidity; on the other hand, you can use it to tie up capital for a shorter period of time compared to a single or fund of funds and still benefit from the unique advantages of the asset class.
What do high-net-worth investors who already have a private equity portfolio and established structures and are not looking for specific products actually do? Who do they address their questions to when they want to implement new ideas or receive offers? How do they ensure that they are following the right strategy in the long term?
Managed accounts are available for these situations. This is the name of FINVIA's service, which involves using the expertise of the family office. As a long-established partner in private equity, we have an excellent team of experts who deal with the fund selection and review of private equity managers. They have the necessary expertise to distinguish lucrative investments from less profitable ones and to develop forward-looking strategies.
We make this expertise available to you with our managed accounts - highly customized.
Due to the growing investment universe, the private equity sector has become more interesting in recent years, especially for newcomers, while advanced investors are pleased with the more diversified options. However, caution is also advised. While this article has only looked at the construction of different funds and services, there are many other factors to consider before subscribing. The first step in building your portfolio should always be to determine your personal strategy strategy. It is the foundation for selecting suitable funds and for your subsequent investment success.
You can find out here how individual goals can influence your investment strategy, for example.
Discover our range of funds for digital subscription on the FINVIA Investment Platform.
Note: Alternative investments are generally suitable for experienced investors who tolerate a high level of risk and are looking to diversify their portfolio. The content of this article is for general information purposes only. This information cannot and should not replace individual advice.
Alternative investments
28.9.2023
Fabian Richter
Single fund, fund of funds or an evergreen structure? The private equity sector has many investment options. In this article, we show you the most important differences between them using FINVIA products and discuss which of them is best suited to your requirements.
If you want to position your portfolio securely today, you can't do without private equity can hardly avoid private equity. The asset class has been particularly popular in recent years, not least because it has outperformed equities, especially in times of crisis. This is a development that many family offices were quick to capitalize on, investing significant proportions of wealth in this investment category and continuing to do so.
However, not every fund is suitable for every investor. Instead of a one-size-fits-all solution, the private equity sector also has various sub-categories with significant differences. So what should you look out for before making an allocation? In the following, we would like to give you an initial insight into the world of these alternative investments based on FINVIA investment solutions.
Single funds are the best-known type of investment in private equity and are therefore true classics. With them, investors invest from €200,000 via a renowned manager such as CVC, Lexington or Genstar. Their usual term is 10 years - while the capital is typically drawn down in stages over the first 5 years, the majority of distributions are made between years 4 and 8.
Basically, such a fund always follows a defined strategy according to which it purchases, develops and increases the value of the companies in its portfolio. The focus can be on particular growth phases, regions, sectors and many other factors.
This high degree of specialization makes the single funds particularly attractive if you are an advanced investor and want to set specific priorities in your portfolio. For example, if you attach importance to focusing on companies in different sectors, for example in Europe, this is the perfect opportunity for you.
But you can also benefit from subscribing as a newcomer. The high degree of individuality of the funds allows you to develop in almost any direction. However, you should always ensure that you are diversified. FINVIA helps you to strategically allocate your intended wealth to different funds. If you would like to create such a portfolio, you should plan a target volume of at least three to four million euros in order to achieve an ideal positioning.
PE Selection is a so-called fund of funds. This means that instead of investing in a portfolio of attractive companies, it invests in a selection of different single funds, which in turn acquire companies. Funds of funds also follow a precisely defined strategy. Parameters such as term, minimum investment amount and conditions correspond to those of the individual funds.
PE Selection is a fund of funds set up by FINVIA itself and launched annually. With 6 - 10 target funds per year, it covers the most important private equity markets, enabling investors to achieve significantly greater diversification per subscription.
This makes it particularly interesting for newcomers who want to maximize the efficiency of each investment. Instead of allocating an individual fund with €200,000 , you can use PE Selection to invest the same amount in a portfolio of selected funds. This not only simplifies the creation of a stable portfolio, but also its administration. Despite its broad diversification, the fund of funds is treated as an individual investment for tax and legal purposes and only capital calls and repayments from one fund need to be processed
These advantages are also of interest to other target groups. For example, more experienced investors like to use funds of funds as the basis of their existing asset structure.
When looking at standard private equity products, the question often arises as to whether they always have to be tied to long terms and investment and distribution phases. In fact, this is not the case, as the example of PE Perpetual shows. Similar to PE Selection, it is a fund of funds and can be subscribed from €200,000 , but is subject to significantly different conditions.
The term is 15 years, but it offers investors far more flexibility in many areas than its illiquid counterpart. For example, the investment can be made once a month and is immediate - the capital is therefore called up directly and not gradually by the investor. The same applies to the payout, which is made in full. After the minimum commitment period of 36 months has expired, up to 20% can be requested each year. However, this liquidity option only applies if returns are not too high, in order to protect existing investors from liquidation constraints.
Similar to the PE Selection, the PE Perpetual is also attractive for newcomers who want to achieve greater diversification per subscription. In addition, however, it is above all its pronounced flexibility that makes it relevant for all target groups. On the one hand, you can use it to slowly "feel your way" into the private equity sector and its illiquidity; on the other hand, you can use it to tie up capital for a shorter period of time compared to a single or fund of funds and still benefit from the unique advantages of the asset class.
What do high-net-worth investors who already have a private equity portfolio and established structures and are not looking for specific products actually do? Who do they address their questions to when they want to implement new ideas or receive offers? How do they ensure that they are following the right strategy in the long term?
Managed accounts are available for these situations. This is the name of FINVIA's service, which involves using the expertise of the family office. As a long-established partner in private equity, we have an excellent team of experts who deal with the fund selection and review of private equity managers. They have the necessary expertise to distinguish lucrative investments from less profitable ones and to develop forward-looking strategies.
We make this expertise available to you with our managed accounts - highly customized.
Due to the growing investment universe, the private equity sector has become more interesting in recent years, especially for newcomers, while advanced investors are pleased with the more diversified options. However, caution is also advised. While this article has only looked at the construction of different funds and services, there are many other factors to consider before subscribing. The first step in building your portfolio should always be to determine your personal strategy strategy. It is the foundation for selecting suitable funds and for your subsequent investment success.
You can find out here how individual goals can influence your investment strategy, for example.
Discover our range of funds for digital subscription on the FINVIA Investment Platform.
Note: Alternative investments are generally suitable for experienced investors who tolerate a high level of risk and are looking to diversify their portfolio. The content of this article is for general information purposes only. This information cannot and should not replace individual advice.
About the author
Fabian Richter
Fabian Richter works as an analyst in the Alternative Investments division and is responsible for the selection and review of investment managers.
Fabian Richter holds a Bachelor's degree in Business Administration from CBS, Cologne, and a Master's degree in Corporate Finance and Financial Engineering from the University of Hong Kong. Mr. Richter also holds the title of Chartered Financial Analyst (CFA®). In addition to his studies, Mr. Richter gained his first practical experience through numerous internships at private equity firms and asset managers.
He began his professional career at HQ Trust, the multi-family office of the Harald Quandt family. As an Associate Partner, he was most recently responsible for portfolio construction and manager selection in the areas of private equity and private debt.
