Private Equity for Retail Investors : How to efficiently involve Finnish retail investors in private equity

Abstract

Private equity has been the best performing asset class for institutional investors. Meanwhile, retail investors have been left out from the asset class for several reasons, such as legislation and wealth profiling. This study aims at assessing the types of private equity vehicles that could be the most appropriate for Finnish retail investors. The study solely focuses on the investment opportunities, hence it does not cover investment behaviour.

Private equity should not be a primary asset in an investor’s portfolio, however private equity offers different risk and return profile than the public equities. Therefore, private equity could be a good addition for many types of investors.

Fin-tech innovations such as equity crowdfunding have enabled private equity investing for all investors. However, active management, strict selection criteria and a well allocated portfolio are things that equity crowdfunding does not offer. Therefore, crowdfunding investors are not getting the same product as private equity investors. Hence, will probably not generate the same returns on their investment.

Several interim vehicles have been created to enable private equity investing for retail investors, however most of the vehicles offer only partial exposure to private equity. Vehicles such as Listed private equity funds and feeder funds are one of the most effective vehicles for retail investors wishing to have private equity in their investment portfolio.