When you start investing, it is important to diversify your investment portfolio as much as possible in order to mitigate the risk of possible loss in the event of an economic downturn, as the coronavirus crisis is currently showing us. This is one of the main reasons why some investors today choose to turn to what is called private equity,


 private equity or investment capital



Private equity literally means “private equity” and is more commonly known in France as “investment capital”. But what is it exactly?


Private equity or capital investment consists of investing in the capital of private companies, i.e. companies not listed on the stock exchange. The objective for investors is to realize more or less long-term capital gains through the transfer or sale of part or all of their holdings.


The different forms of investment capital

Specialists distinguish between four types of private equity investment:


venture capital corresponds to investment in a company in the creation phase. It can take the form of seed capital if the investment is made before the start of the activity, or of creation capital, which corresponds to an investment at the time of the actual launch of the activity;

development capital is an investment in a company wishing to increase its production capacity and its sales force and therefore seeks investors to support it in its growth strategy;

buyout capital consists of investing in a company whose managers wish to facilitate the transfer to new shareholders. It often takes the form of what is called the “Leveraged Buy-Out” (LBO);

turnaround capital corresponds to investment in a company facing serious difficulties in order to restore its financial health. However, it is an uncommon form of private equity.


 what is investment capital


It is not easy for a particular investor to invest his money alone in private equity. Indeed, it is first necessary to have expertise to target the right profiles of companies among those seeking financing. In addition, it is then necessary to have skills in financial analysis within the framework of the study of possible investment files.


All these elements present a priori many barriers for the individual investor. Nevertheless, investment in private equity is possible via private equity companies listed on the stock exchange or through specialized funds such as FPS. In France, for example, it is possible to buy shares in FIPs (Local Investment Funds), FCPIs (Innovation Mutual Funds) or even FCPRs (Risk Mutual Funds) which go invest for you in Private Equity.







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