Investing in Private Equity

Private equity has traditionally been a closed world, primarily focused on banks and pension funds. Entry thresholds for private equity funds are high, typically starting from EUR 5 million for leading international private equity funds. In-depth knowledge is also required to understand the complexity of private equity.

As a result, the private equity sector is generally not accessible to private investors. Through a fund-of-funds, such as BB Capital Fund Investments, it is possible to invest with lower amounts. These funds pool capital from multiple investors, creating sufficient scale to invest across several funds. This provides private investors with accessible entry to diversified investing in the private equity sector.

BB Capital Fund Investments offers individual investors simple access to private equity through a unique fund. The fund invests your wealth independently, in a diversified manner and over the long term in the private equity sector, with a sustainable long-term return objective of 10–15% per year.

• The fund continuously invests your wealth across the European private equity sector.
• The fund focuses on high-quality funds that have been thoroughly assessed against strict selection criteria.
• The fund has an unlimited term, allowing returns to be continuously optimised.
• Investors can enter annually, while exits are facilitated by the fund.
• The fund distributes your return annually in due course.
• You can determine your own risk-return profile by making use of preferred participations.

Participation in BB Capital Fund Investments is accessible for investments of EUR 250,000 and higher.

The BB Capital Private Equity Fund is a so-called fund-of-funds, or FoF. This means that it pools capital from various investors and then invests this capital in a selection of different private equity funds, rather than directly in individual companies, as we do through our direct investments. The fund-of-funds model offers investors diversification across multiple funds and the underlying companies, which can help spread both the investment and the risk.

How does a private equity fund-of-funds work?

1. Capital: The FoF pools capital from various investors, such as pension funds, insurance companies and, in some cases, high-net-worth private investors.
2. Fund selection: The FoF fund manager selects a portfolio of private equity funds in which to invest. This selection process is based on due diligence, where funds are assessed on their performance, strategy and the quality of the fund managers.
3. Investment: The capital raised is allocated across the selected private equity funds. These funds, in turn, invest in a range of unlisted companies across different sectors, geographies and stages of business development, depending on the focus of the fund manager’s selection.
4. Management and monitoring: The fund manager monitors the performance of the underlying private equity funds. This includes periodic reviews, based on which decisions may be made regarding potential divestments or reallocations of capital. A strong fund manager stays closely informed through direct contact with the funds in the portfolio, by attending Annual General Meetings and by reviewing ongoing reports.
5. Returns and distribution: Over time, the underlying funds distribute returns to the fund-of-funds, for example through dividends, interest income, or proceeds from sales or IPOs. The fund-of-funds then distributes these returns to its investors, net of management fees. In the case of the BB Capital Private Equity Fund, this is an ongoing process from day one, as investors’ capital is invested directly through the evergreen structure.

Benefits of a fund-of-funds

1. Diversification: By investing in multiple funds, risk is spread across different management teams, strategies, sectors and geographies.
2. Access to leading, exclusive funds: Fund-of-funds often have access to high-quality and exclusive private equity funds that are difficult for individual investors to reach due to high entry thresholds.
3. Professional management: Investors benefit from the expertise and experience of professional fund managers who carry out the due diligence, management and fund selection.

Investing in private equity means investing capital in companies that are not listed on a stock exchange. In other words, it means investing in companies that are not publicly traded on the stock markets. Investments can take place at different stages of a company’s development. Within private equity, these stages are generally referred to as start-ups, or venture capital; scale-ups, or growth capital; and acquisitions of existing companies, known as buyouts.

Key characteristics of investing in private equity

1. Long-term investment: Private equity investments are typically made for the long term, often five to ten years.
2. Active involvement: Investors often play an active role in the management and strategy of the company.
3. High returns, higher risks: Private equity investments can offer high returns, but may also involve higher risks than other forms of investment, particularly in the case of venture capital and growth capital.
4. Illiquidity: The invested capital is committed for the full investment period, making it difficult to trade and therefore illiquid.
5. Diversification: Investors can diversify their portfolio by investing across different sectors and companies.

Investing in private equity

Investing in private equity refers to the same process as private equity investing. Both terms are often used interchangeably and essentially mean the same thing: providing capital to non-listed companies with the aim of achieving a financial return.

Private equity invests capital from financial institutions, wealthy families and individuals in fast-growing private companies. Through active involvement in the management and strategy of these companies, private equity funds can generate strong returns, averaging around 13% per year. This makes investing in private equity an attractive alternative to investing in the stock market or in real estate.

The benefits of investing in private equity include:

1. Private equity can influence results: value creation, much like entrepreneurs do within their own businesses.
2. A long-term horizon: making it highly suitable for wealth accumulation and wealth transfer
3. Less dependence on stock market sentiment: private equity is not driven by the daily sentiment of the stock market.
4. Portfolio stability: private equity can contribute to greater stability within an investment portfolio.