Non-listed companies within reach: private equity opens up to private investors
Long the preserve of institutional investors, private equity is gradually opening up to a wider public, attracted by its solid performance and promise of diversification. With return targets 3% to 5%1 higher than equity markets, this asset class is gaining ground in allocations, particularly among private investors. And according to Pictet Alternative Advisors, the momentum is far from waning.
While returns have been good in the past, it is important to remain vigilant. Private equity is not a sprint, but a long-distance race. It requires a long-term vision and the ability to tie up capital over several years. Added to this are sometimes high fees and a performance that, as with any investment, is never guaranteed.
Performances that speak for themselves
Over the past ten years, private equity has delivered an average annual performance of 15.8%, compared with 12.4% for the US equity market, which is considered the global benchmark.
The principle is simple: invest in unlisted companies – start-ups, SMEs or ETIs – with a holding horizon of several years. The objective? We support them in their governance, improve their operations, stimulate their growth in sales and EBITDA, and then sell them, hoping to make a handsome capital gain on exit. These investments can be made directly, via equity stakes in companies, or indirectly, via specialized funds that select a hand-picked mix of companies.
Typically, funds build their portfolios over a five-year period, with a dozen or so target companies. The managers then actively support these companies, before selling their holdings once profitability has been optimized. On average, ten years elapse between the first acquisitions and the last disposals, with the first returns on investment often appearing from the fifth year onwards.
Family offices on the front line
Despite this long holding period, private equity is still very attractive. More and more wealth management advisors are offering forays into the non-core market.
In the latest Barometer of the French Family Office Association (AFFO), private equity – whose products are reserved for specific investor classes – emerged as the leading asset class in the allocation of these wealthy families, up 15 points on the previous year.
Controlled volatility, less stress
Far from being a hindrance, illiquidity can become an asset for investors with the capacity to bear this constraint and long-term commitment. Unlike listed markets, private equity is not subject to continuous listing. “The absence of liquidity is a strength: it avoids emotional reactions in times of market stress and allows us to remain invested over the long term,” emphasizes Beatrice Reitano, Head of Private Equity Investor Relations at Pictet Alternative Advisors. “It’s a way of avoiding market noise and focusing on real value creation.”
Birkenstock, or the fairy tale of the unrated
The story of Birkenstock, a family business founded in 1774, is a perfect illustration of the power and added value of private equity. Known for its cork sandals made by orthopedic shoemakers, the brand has survived the centuries but has stagnated…until L Catterton, a private equity firm backed by LVMH and Bernard Arnault, acquired a stake in the company. In 2021, L Catterton acquires a majority stake in Birkenstock with the ambition of repositioning the brand in the world of fashion and luxury. The family management was replaced by Oliver Reichert, the new CEO, who transformed the company by strengthening direct sales, optimizing margins, expanding in Asia, and working exclusively with LVMH brands. The result: a transformed brand, listed on the New York Stock Exchange in 2023, generating a handsome multiple for investors in less than five years. “The entry of a private equity fund like L Catterton, with its recognized expertise in the consumer sector, has enabled Birkenstock to go from sleeping beauty to global icon,” sums up Beatrice Reitano.
The Pictet Group
The Pictet Group is run by partners, who are both owners and managers. The principles of shareholder succession and capital transfer have remained unchanged since the company was founded in 1805. The Group focuses exclusively on wealth management, asset management, alternative investment management and asset servicing. It does not offer commercial loans or investment banking services.
With assets under management or in custody amounting to CHF 724 billion (EUR 771 billion, USD 799 billion, GBP 638 billion) at December 31, 2024, Pictet is one of Europe’s leading independent wealth and asset management companies.
The Group is headquartered in Geneva, where its activities began, and employs around 5,500 people. With 31 offices worldwide, it is also present in Amsterdam, Basel, Barcelona, Brussels, Dubai, Frankfurt, Hong Kong, Lausanne, Lisbon, London, Luxembourg, Madrid, Milan, Monaco, Montreal, Munich, Nassau, New York, Osaka, Paris, Rome, Shanghai, Singapore, Stuttgart, Taipei, Tel Aviv, Tokyo, Turin, Verona and Zurich.
Pictet Alternative Advisors
An independent entity of the Pictet Group, Pictet Alternative Advisors (PAA) is responsible for direct and indirect investments in hedge funds, private equity and real estate for private and institutional clients. PAA employs almost 200 alternative investment specialists and manages USD 46 billion, of which USD 27 billion is invested in private equity strategies, USD 14 billion in hedge funds, USD 4 billion in real estate assets and USD 1 billion in private debt (figures to end December 2024).
