Benefits of LPE
As already pointed out the defining “economic” characteristics of private equity, i.e. investment styles and financing styles, are shared between both listed and unlisted private equity.
From an investor’s point of view there are significant benefits associated with an investment in listed private equity:
LPE companies follow the same business model and exhibit the same risk and return potential as their unlisted counterparts.
An LPE company provides shareholders an immediate exposure to a diversified private equity portfolio and exhibits the following characteristics:
Liquidity | Liquid exposure to the private equity asset class; no issue with lock-up; no issue with fixed investment horizon | |
Access | No minimum investment requirements in contrast to traditional private equity (limited partnerships); direct and immediate exposure to a diversified private equity portfolio; no issue with j-curve effect | |
Transparency | Transparent private equity investment portfolio; listing involves high standards of disclosure | |
Diversification | High degree of diversification across regions, private equity investment styles (buyout, growth and venture) and financing styles (equity and mezzanine) | |
Cost | No transaction cost except for bid-ask spread; on average lower management fees than for limited partnerships | |
Performance | Long-term outperformance of all major asset classes | |
Discounts | Investor can often buy at a discount to Net Asset Value (NAV) |
