Private equity is investment in companies that are not listed on a public exchange.

The definition is simple. The implications are not.

Buying a share in a listed company means acquiring an ownership stake in a business whose price is determined continuously by the market. Investing in private equity means taking an ownership position in a business where there is no daily price, no ready buyer, and a holding period often measured in years rather than days.

That difference creates a different set of opportunities and a different set of demands. It also makes manager selection particularly important, which is one reason private equity is often viewed through the lens of investment partnerships.

The four broad types

Private equity is not a single strategy. It covers investments at very different stages of a company’s life, with different return drivers and risk characteristics.

Type	What it involves
Venture capital	Investing in start-ups, potentially before they are generating revenue
Growth equity	Investing in companies in a growth phase that require capital to expand operations
Buyout	Investing in mature companies looking to transform or optimise strategy or operations
Distressed and special situations	Investing in companies requiring turnaround, including those emerging from bankruptcy

These are meaningfully different propositions. A venture capital investment and a buyout investment may share a legal structure but have very different risk and return characteristics.

Understanding which types a portfolio holds, and in what proportion, is often more important than the label attached to the asset class.

Why an asset owner invests in it

There are three primary reasons.

Access to opportunities beyond listed markets

A substantial share of economic activity occurs in privately owned businesses. Investors confined to listed markets are accessing only part of the available opportunity set.

Exposure to different return drivers

Returns from listed equities are largely influenced by market movements and company earnings. Private equity outcomes are often more heavily influenced by operational improvements, business transformation and growth initiatives within individual companies.

Long-term return opportunities

Private equity is often considered by investors seeking access to long-term return opportunities that may differ from those available in listed markets. Outcomes vary significantly between managers and investments, and returns are typically realised over years rather than reporting periods.

What it asks in return

What it offers	What it demands
Access beyond listed markets	Capital committed for extended periods
Different return drivers	Acceptance of illiquidity
Long-term return opportunities	Higher fees than many listed strategies
Ownership influence over operations	Greater use of leverage in some strategies
Access to specialist expertise	Tolerance for headline and reputational risk

Each item on the right is a genuine consideration rather than a minor caveat.

Capital committed to a private equity fund is drawn down at the manager’s timing, not the investor’s, and may not be returned for many years. Fees are generally higher than listed market equivalents. Leverage can amplify outcomes in both directions. Private ownership can also attract increased public attention, particularly where a business is well known or employs a large workforce.

These characteristics are not flaws in the asset class. They are part of the trade-offs investors accept in exchange for access to opportunities that may not exist elsewhere.

What we have learned

Three lessons stand out from investing in private equity over long periods.

Commitment has to be genuine

Private equity does not reward intermittent participation. Manager relationships, access to opportunities, and the discipline of investing across market cycles all depend on being a consistent participant rather than an occasional one.

Entering when the asset class is performing well and withdrawing when it is not can undermine the benefits of long-term exposure.

It will not always move in step with listed markets

Private equity valuations typically move more slowly than listed market prices.

During strong listed equity rallies, private equity can appear to lag. During periods of market stress, valuations may also adjust differently. This is a structural feature of how private assets are valued and held rather than a reflection of short-term success or failure.

The operating model matters

How an investor accesses private equity, whether through pooled funds, co-investments or direct investment, influences fees, governance requirements, control and internal capability needs.

The most appropriate structure depends on the objectives of the portfolio rather than what happens to be available at a particular point in time.

How this fits our approach

Funds SA accesses private equity through specialist investment managers rather than investing directly in private companies.

Our role is to identify, appoint and oversee managers with expertise in specific parts of the market, and to maintain a governance framework that supports long-term investment outcomes.

This reflects our third investment belief: that partnerships can add value where inefficiencies exist and where experience provides an edge.

Private markets are one of the clearest examples. Information is less widely available than in listed markets, access is more selective, and the difference between strong and weak managers can be significant. In those environments, the quality of the manager becomes a critical part of the investment outcome.

Why partnerships matter

Private equity can provide access to opportunities that are not available through listed markets alone, but it also places greater importance on manager selection, governance and long-term commitment.

Success in the asset class depends not only on identifying attractive investment opportunities, but also on working with managers who have the expertise, access and capability to execute them.

That is why partnerships sit at the centre of our approach. In markets where information is less widely available and outcomes can vary significantly between participants, the quality of the manager can matter as much as the quality of the opportunity itself.