Você quer investir em private equity. Como escolher a plataforma certa para o seu negócio?

Investing in Private Equity is becoming more and more accessible for consumers. Besides the investment solutions mentioned consumers can more often access PE fund of funds (i.e. a fund that invests in multiple PE funds). Investing in such a fund of funds provides consumers access to to a diversified portfolio of indirect in investments in private companies. This lowers any idiosyncratic risk an investor might have from investing in either one fund or one private company. Also, consumer individually might not have access to some of the funds provided in the fund of funds. Hence, Private Equity fund of funds are an additional platform through which you can invest in PE making it more accessible for consumers through these vehicles.

Choosing the right private equity platform requires a strategic assessment. Define your investment goals and risk tolerance, aligning them with the platform's offerings. Evaluate platform types—funds, co-investments, direct investments, or online marketplaces—considering diversification, control, and flexibility. Scrutinize risk-return profiles, management expertise, and historical performance. Prioritize transparent communication, reasonable fees, and budget-aligned minimum investments. Assess exit strategies, regulatory compliance, and technology. Thorough due diligence on the platform's reputation and performance is key. Consider tax implications and exit options for a well-informed decision.

Choosing the right platform is a critical decision that aligns with your investment goals and risk tolerance. For those new to private equity, funds can offer diversification and professional management, mitigating some risks inherent in direct investments. However, if you're seeking more control and potentially higher returns, exploring direct investments or co-investments might be your path. Online marketplaces, on the other hand, can provide access and transparency to a range of opportunities. It's about finding the balance that suits your investment strategy, while also considering the long-term commitment and illiquidity nature of PE investments.

The platform you pick needs to be a direct reflection of your personal interest and values. If agency and choice is important to you, don't pick a blind pool fund (think something like Bain Capital's PE or Sequoia's VC funds). Paying 2%/20% is a feature, not a bug of these funds. You are paying for the expertise of a team of investors, in the same way you might pay for a tax accountant or investment advisor. For investors who like the agency and choice, you should source these deals directly or join a private investor community (think TIGER 21). For investors who prefer to pay for an experienced team of investors, then blind pool funds are the right move. Many Investment Advisors will offer these products (albeit at a markup!).

Investing with Funds is good idea if you don't have knowledge and time to find deals for your portfolio. Networking also plays a crucial role in this where you can find good deals of PE.

It’s essential for choosing the right Private Equity Platform to check if it has licenses from competent authorities Regulators for managing the funds. Also it’s also important to check the reviews from existing investors and discuss with them about their experience.

When selecting a private equity platform, it's crucial to look into their track record and reputation. Opt for a platform with a proven history of delivering returns, managing risks, and offering transparency and support. Investigate the credentials, experience, and reputation of the individuals or entities associated with the platform, like fund managers or co-investment sponsors. Conduct online research, seek referrals, or consult independent advisors to ensure the platform and its partners have a solid and reliable standing in the investment landscape.

When picking a private equity platform, make sure there's alignment of interests. Choose a platform that shares your vision, values, and objectives, with a fair and transparent fee structure. Avoid conflicts of interest or hidden agendas that could impact your returns. Review the terms and conditions, ask questions, and negotiate to ensure you're getting the best deal possible. It's about finding a partnership where everyone is on the same page and working towards mutual success.

"Show me the incentive, I'll show you the outcome," said the late Charlie Munger. Looking at the costs and fees and ultimately the business model of the platform is key to check the alignment of interests. Large upfront fees are generally a red flag because they incentivise to sell more, but each platform may have a different fee structure.

We need to be clear about our interests and investment thesis for it to align. This is the most difficult part of the exercise and it can be improved by talking and discussing with some PE professionals. Once we are sure we need to search which platform has the most overlap with our thesis and then proceed to the due diligence. Probability of finding a total match is quite low so pick the best fitting one.

Choosing the right private equity platform is crucial for success. Begin with thorough research on track record, reputation, and specialization. Prioritize transparency and communication, ensuring detailed updates on investments. Scrutinize the fee structure for fairness and watch for hidden fees. Assess incentive alignment by choosing platforms with a significant stake in success. Align values and principles with the platform's vision, considering their commitment to ethical investing. Mitigate conflicts of interest with clear policies. Negotiate terms to your needs and ensure legal compliance. Consideration of these factors enhances the likelihood of selecting a platform aligned with your interests and maximizing investment potential.

Check for your interest and the one which aligns with your interest will be best for you. There are some platforms where you can invest in PE companies like AngelList, CrowdCube, SeedInvest and many more platforms where you can invest in PE companies.

Except from due diligence that Private Equity platform shall offer to the investors regarding the performance and progress of investments, it’s essential to establish risk management mechanism and offer safeguards for eliminating the investors’ risks.

In addition to that, as investor, you need to have the capacity to understand financial reports in the context of PE investments. This encompasses : financial literacy (particularly in interpreting and analysing audited financial reports) or valuation methods.

Platforms introduce a new layer of due diligence: on the platform itself. You should do your due diligence on the fund you invest in, as it will impact the return ON your money. Picking the wrong platform could impact the return OF your money. The custodial issues are generally heavily regulated in traditional finance, but this may not be the case for the startups that offer access to Private Equity. And as you invest for the long term, you need to think of any risk that can affect the platform in the next 10 years. In short, make sure that if the platform disappears, your funds are safe.

There's a big trend for semi-liquid funds that's encouraged by platforms and providers. This can be misleading because neither can't change the illiquid nature of the assets. The small print will indicate that liquidity can be gated at any time, which is what happened (and is still the case as I write) with the $120bn BREIT fund from Blackstone and many others.

(a) Assess the firm's processes for preparing companies for exit. This includes governance improvements, financial restructuring, and operational optimisations. My observation has been that firms that actively engage in exit preparation enhance the company's value. An example is a logistics company that underwent significant operational efficiencies ahead of a sale, directly contributing to a higher valuation at exit (b) The ability of a PE firm to navigate complex regulatory and compliance landscapes can significantly impact exit success, especially in highly regulated industries. Drawing from my experience, a healthcare business we worked with benefited immensely from a PE partner's expertise in healthcare regulations.

From personal experience, I cannot overstate the value of good customer service. A lot of money is at stake, regulatory requirements are to be adhered to, tax implications to be considered. I have had the customer service assess certain tax treatments in international investments. I have had third party providers providing timely advice and thereby jeopardizing deals. Point being - in PE usually larger ticket sizes are at stake and legal and tax considerations be tricky. It is therefore crucial to have a trustworthy and responsive customer service that understands the situation and provides reliable and swift advice.

(a) Understand the platform's typical investment horizon and exit strategy. It's crucial to align your investment timeline with the platform's strategy. I've experienced scenarios where a mismatch in exit strategy timelines impacted my investment liquidity and returns (b) Research the platform's reputation in the market. Speaking with existing or past investors about their experiences can provide valuable insights. My practice includes thorough research and reference checks, which have often revealed critical information about the platform's operational and ethical standards (c) Ensure the platform adheres to high regulatory compliance and ethical standards.

When selecting an investment platform, consider the cultural fit, governance standards, and risk management practices. Building solid relationships with the platform's team members is crucial for effective collaboration. Robust risk management capabilities and strong governance practices can help preserve and enhance your business's value.

The data from Private Equity is often misunderstood and confusing for traditional investors. For example, PE firms will typically provide figures showing above-average returns with lower volatility. This is because they use IRR and smoothed returns data which are not comparable to public markets return. The charts from Private Equity are usually not based on investable data, so investors need extra caution.