Where can we buy shares of Private Equity? Do we need broker? Please name the broker.
Well unlike investing in mutual funds, whereby you can invest smaller monthly amounts in the form of SIPs for long term wealth creation, such a model does not exist for private equity investing. And there are valid reasons for it not being there.
- Firstly unlike mutual funds, private equity funds invest in businesses with huge potential.That being said , these businesses generally take a long time to be mature and even be cash flow positive.Private equity firms thus generally wait for a long time to exit(sell) their investments.Effectively these investments are illliquid.Neither the firm or any individual investor can pull out their money as per their convenience.A huge holding period is thus a deterrant.
- Secondly unlike mutual funds which keep investing your money in the capital markets every month,with private equity that model is not logically feasible. PE firms always invest a lumpsum of money in selected ventures and wait it out for a fee years to find a right time to exit . They do welcome individual investors but only if you are willing to commit a lumpsum amount for at least a time horizon of 5 years.Most of the PE firms in India do not accept a ticket size of less than 10 crore from individual investors.
- Such a large ticket size, although a deterrant for people who want to be a part of the so called but very few ‘multi billion’ dollar exits is actually a blessing in disguise. The reason is that statistically 9 out of 10 ventures fail.
- Private equity is one of the most volatile asset classes around. It literally represents the ‘all or nothing’ adage.There is a very good chance that you might not get your money back.This is extremely unsuitable for small and retail investors who want to invest a few thousands every month from their income.
- Thus summing it up,Private equity always has been and should continue being a field for institutional investors or HNIs/UHNIs. For everyone else its just like throwing a dart across a dark room hoping it hits the bulls eye.
Can’t we buy and hold like listed shares from broker?
I’m not quite sure about your actual question. Shares that are listed can be bought as a normal buy delivery order from the market right? Or is your question something else?
Can check this.
If you are a part of that company whether directly or indirectly, then only you can buy the shares which are also called private shares. Apart from this, there is no other alternative of investing in any private equity because private companies do not provide their shares to the general public.