Private Equity

Most people own public stocks directly or indirectly through mutual funds or ETF’s. The stock market is comprised of publicly traded companies; currently there are about

2,400 publicly traded companies that have annual revenue more than

$100 million. The reality is publicly traded stocks only make up 17% of US companies of that size. There are approximately 18,000 private businesses that have over $100 million in annual revenues.

Many great companies have decided they don’t need to become publicly traded. Private Equity funds often seek to take a controlling interest in profitable private businesses and then attempt to grow the companies to increase their value. Since 2003, investors in private equity have seen 60% more growth in their capital than investors in the S&P 500 total return index.

Perhaps one reason private equity has outperformed the stock market is because private equity investors typically pay lower multiples for a company’s earnings. When private equity funds buy private companies, they might pay 5 - 9 times annual earnings. Whereas when you invest

Historically, private equity investing was the domain of large institutions, family offices, and pension funds with the minimum investment often starting at $5,000,000. Today there are now private equity investments in evergreen funds available for as little as a $50,000 investment. You may want to ask your advisor about which private equity funds they are recommending if you want to increase diversification your portfolio.