Market > What is Private Equity?

Alternative Investment assets (Private Equity, Hedge Funds and Real Estate) currently form a fundamental element of the investment strategies and portfolio creation of the main investment institutions at an international level.

The inclusion of Alternative Investment assets in traditional investment portfolios contributes, on the one hand, to obtaining better medium and long term returns, and on the other hand, to improving the risk-return profile of the portfolio thanks to its lower correlation with the return created by traditional assets.

Altamar offers tailored Private Equity investment products in which attractive returns are sought through access to the best managers, forming a conservative investment portfolio with an appropriate level of diversification.

Ways of investing in Private Equity

The Private Equity market consists of investing in the capital of unquoted companies. In general terms, the investment in Private Equity is channelled through three strategies:

 Direct Investment in one or more unquoted companies
Investment in Specialised Funds that in turn invest in unquoted companies. The investor obtains greater diversification by investing through the fund than by direct investment
Investment in Funds of Funds which invest in a portfolio of specialised funds. Through the funds of funds, the investor obtains extremely wide diversification both at a "Geographic Risk" and/or "Sector Risk" level and at a "Manager Risk" level.

Private Equity asset classes

Within the Private Equity market there are four different asset classes with very different characteristics.

LBO/Buyouts- investment in very mature companies with an important presence in their respective markets and whose acquisition is likely to be financed to a great extent through outside finance (debt)
Venture Capital- investment in companies with a higher risk profile since they are of new or recent creation or because they require finance to start up and/or develop their business or to undertake new projects
Special Situations- investments which are typically situated between the Buyouts and Venture profiles since they are companies that require a certain level of operational and/or financial restructuring
Private Equity Real Estate- investment in a specific segment of the market following an asset investment and management strategy which is similar to that implemented by managers of the LBO/Buyouts segment.

Characteristics of investment in Private Equity

Private Equity financial assets have great appeal as part of the portfolios of institutional investors and high net worth investors as they improve the risk/return profile of these portfolios. However, to invest in Private Equity, the investor should take into account a series of important considerations regarding these financial assets

Terms: Investments with medium or long term maturities
 Liquidity: Limited access to liquidity
 Risk/return: Higher returns mean a certain element of risk
 Choice of manager: There is greater dispersion between the returns obtained by the best managers and the average returns of the sector compared to other financial assets
 Access: Access to the best managers is highly restricted
 Minimum investment: High minimum amounts of investment making it difficult for medium size investors to build a diversified portfolio of Private Equity funds.
Complexity: Structures of Private Equity funds are very complex to analyse
 J-Curve: The investor makes disbursements during the first 3-5 years and typically does not receive any distributions until a few years have passed so that the initial valuations of the Private Equity funds tend to be negative during the first years