Private equity involves investments of equity capital in private businesses by providing long-term committed share capital to help unquoted companies grow and succeed. Listed Private Equity (LPE) companies are private equity companies listed on a stock exchange. Listed Private Equity companies follow the same business model and exhibit the same risk and return characteristics as their unlisted counterparts. A Listed Private Equity 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 capital lock-up; no fixed investment horizon
Access – No minimum investment requirements in contrast to traditional private equity funds (limited partnerships); direct and immediate exposure to a diversified private equity portfolio; no 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 (i.e., buyout, growth and venture) and financing styles (i.e., equity, debt and mezzanine)
Cost – No transaction costs except for bid-ask spread; on average lower management fees compared with traditional private equity funds (limited partnerships)
Performance – Long-term outperformance of all major asset classes
Discounts – Depending on market environment, investors can often buy at a discount to the fundamental value (Net Asset Value)
