| 1. Direct
route - direct investment into unquoted companies |
|
Pros |
Cons |
- Full control
- Direct access to unquoted companies.
|
- Full responsibility
- Requires substantial funds to achieve an adequate spread of
investments
- Cost and commitment: need for substantial permanent staff
- Staff need expertise in negotiating and structuring the initial
investment, monitoring the companies and exits
- Requires access to potential investment opportunities, as
success depends on quality and quantity of deal flow. The private
equity industry estimates that it invests in only one in 100
proposals.
|
| 2. Investment
trust route - listed venture and development capital investment
trusts |
|
Pros |
Cons |
- Share price reported on a daily basis
- Liquidity
- Many investment trust managers take a position on the board
of the company in which they invest to keep in close contact
with the company's development
- Established investment trusts have a high level of expertise
and quality deal flow
- Relatively low fees and transaction cost.
|
- Shares may trade at a discount to net asset value.
|
| 3. Segregated
route - dedicated fund managed by a private equity manager |
|
Pros |
Cons |
- High level of control
- Good accountability and direct contact
- Flexible - no fixed time period and can be tailored to your
requirements.
|
- Requires substantial funds to be commercially viable and to
spread risk.
|
| 4. Fund route
- investment into private equity funds alongside other investors |
|
Pros |
Cons |
- Over 200 private equity funds enabling a wide selection of
investment opportunities
- Wide range and number of private equity managers seeking to
raise new funds in which to invest over the next few years
- High level of control
- Private equity funds are directly accountable to you
- Many private equity fund managers take a position on the board
of the company in which they invest to keep in close contact
with the company's development
- Established private equity funds managed by most BVCA members
have a high level of expertise and quality deal flow.
|
- Need for staff to achieve and maintain a good knowledge of
private equity fund managers, fund raisings, portfolio content,
performance, etc
- Minimum level of investment may apply.
|
| 5. Funds
of funds route - managed by a "gatekeeper" |
|
Pros |
Cons |
- Access to a diversified private equity portfolio eliminating
the risk of under diversification
- Expertise in investing in private equity funds, knowledge
of private equity managers' performance, methods, portfolios,
fund raising timings, etc
- Offers an insight into private equity fund investment for
those who do not yet wish to be involved in in-house or direct
fund investment.
|
- Double layer of fees (from the gatekeeper and the private
equity fund manager)
- Potential barrier between private equity manager and fund
manager, reducing accountability
- Potential conflicts of interests can arise for gatekeeper
- Limited number of experienced fund of fund managers in UK
- Longer term commitment (up to 15 years).
|
