Private equity: a new era for individual investors

What is Private Equity?

Private equity refers to investments made in unlisted companies, typically with the objective of supporting their development, restructuring, or growth. Private equity funds invest directly in these businesses in exchange for equity stakes and take an active role in management to increase value and generate medium- to long-term returns. The main goal is to realize capital gains through a sale or an IPO.

This type of investment is considered high-risk due to the illiquidity of the assets and the lack of a public market, but it also offers the potential for higher returns owing to its growth-oriented nature.

A Growing Market: Why Are Retail Investors Turning to Private Equity?

In recent years, private investors have shown a growing interest in private equity. This trend stems from a desire to diversify their portfolios and explore alternatives to traditional investment vehicles that offer more attractive returns.

Opportunities in Innovative Sectors

Private equity presents unique benefits that increasingly attract retail investors. Unlike public markets, it offers access to high-growth, unlisted companies, particularly in emerging and innovative sectors such as technology, renewable energy, and healthcare. This allows investors to participate in cutting-edge projects.

Diversification and Active Involvement

Beyond the potential for higher returns, private equity enables more active involvement in company development. In addition, co-investment opportunities provide further portfolio diversification, with exposure to targeted sectors or strategically positioned companies.

Protection from Market Volatility

Private equity offers relative protection from the volatility of financial markets due to its low correlation with listed assets—an important advantage for long-term investors.

Regulatory Changes Opening Access to Private Equity

Private equity is becoming more accessible to individual investors, thanks to a number of regulatory developments:

• Relaxed conditions for accessing FCPRs (Risk Investment Funds) and FPCIs (Professional Private Equity Funds): These vehicles allow investments in unlisted companies with lower entry thresholds and favorable tax treatments.
• Integration into life insurance policies and retirement savings plans (PER): This has made private equity available through widely used investment wrappers.
• European initiatives promoting transparency and liquidity in unlisted funds: These measures help better manage risk while opening new opportunities to individual investors.

What Opportunities Are Available for Retail Investors?

The rise of new types of funds and investment platforms has made private equity increasingly accessible to individual investors, providing them with more flexible and tailored access to unlisted assets.

Open-Ended “Evergreen” Private Equity Funds

These funds provide greater flexibility, allowing investors to enter and exit their investments more freely compared to traditional closed-end funds, which typically require long lock-up periods. This allows for more dynamic portfolio management and improved liquidity.

Investing in Innovative Startups and SMEs

One of the major benefits of private equity is the opportunity to invest in startups and SMEs that are often at the forefront of technological or business innovation. These investments may offer strong returns, though they also carry higher risk. The rise of incubators and specialized funds now makes such opportunities accessible to a broader investor base.

Crowdfunding and Fractional Investment Platforms

Digital crowdfunding platforms and fractional investing options are making private equity more inclusive. They enable investors to buy shares in private companies with lower entry amounts—sometimes starting at just €1,000—thus opening doors to a wider audience.

Impact and ESG Funds (Environmental, Social, Governance)

With growing interest in responsible investing, impact and ESG-focused funds are multiplying. These funds target companies and projects that contribute positively to the environment, society, and corporate governance. Whether in renewable energy, sustainable healthcare, or green technologies, they allow investors to align returns with social responsibility.

What Risks and Precautions Should Be Considered Before Investing?

While private equity offers attractive return potential, it also comes with specific risks that investors must carefully assess.

Capital Loss Risk

Investing in unlisted companies carries the risk of total or partial capital loss. If the invested company fails to grow as expected or experiences financial difficulties, the value of the investment may decrease significantly or even be lost entirely.

Illiquidity

Unlike publicly traded assets, private equity investments are typically subject to long lock-up periods. Investors may not be able to sell or transfer their shares before the investment matures, reducing financial flexibility.

High Management and Performance Fees

Private equity funds often involve higher fees than traditional investment products, including annual management fees and performance fees tied to returns. These costs can significantly impact net returns over the long term.

The Democratization of Private Equity: A Turning Point for Savers

The expansion of private equity access to individual investors reflects a broader transformation in savings and wealth management habits. With more options and the rise of specialized platforms, private equity is becoming an integral part of diversified investment portfolios.

The Key Players Driving Access

Several new players are actively contributing to the democratization of private equity:

• Fintech platforms and digital apps: These allow individuals to invest in private equity through simplified, user-friendly interfaces.
• Private banks and wealth managers: Responding to the demand for diversification, they now offer private equity investment vehicles tailored to individual investors.
• Institutional fund managers: Some traditional asset managers have adapted their offering to include products accessible to smaller investors.

Eurazeo: A Pioneer in Private Equity Access for Retail Investors

Eurazeo stands out as a pioneer in expanding private equity access. The firm offers individuals the opportunity to invest in diversified funds starting at €10,000. Thanks to its multi-sector platform, Eurazeo enables investors to gain exposure to a wide range of projects, from technology and healthcare to sustainable energy. This flexible and accessible approach opens the door to new opportunities while ensuring rigorous and diversified portfolio management aligned with the needs of retail investors.

What Strategies Should Retail Investors Consider?

To invest effectively in private equity, it’s important to diversify across several funds or sectors to mitigate risk. A long-term horizon—typically 5 to 10 years—is often required. Assessing historical fund performance can help evaluate the quality of fund management. Additionally, thematic or impact-oriented funds focused on areas such as energy transition or technology can offer compelling growth potential.

Access to private equity for retail investors represents a new frontier for portfolio diversification and performance. With recent regulatory advances and a growing range of accessible solutions, individual investors now have the opportunity to seize promising investment opportunities in innovative sectors.

This article was produced by Eurazeo Global Investor for informational purposes only. It should not be considered as a solicitation or offer to buy or sell financial products, nor as legal, tax, or investment advice. Readers are encouraged to consult their own advisors for any evaluation related to the content of this article. The information presented is not exhaustive and should not serve as the sole basis for an investment decision. Please refer to the legal documentation of the mentioned funds prior to making any final investment decisions.

Past performance is not necessarily indicative of, nor a guarantee of, future results. Information regarding previous investments is provided solely to illustrate the nature of such investments, as well as the related strategy and investment process. There is no assurance that similar results will be achieved, or that targeted returns will be met. Investing in private equity or private debt funds involves a risk of capital loss and illiquidity.