Private equity and public markets: two historical pillars of investment

Private Equity vs Public Markets: A Key Distinction for Your Investment Strategy

Private equity and public markets represent two distinct investment approaches, each offering different levels of accessibility and return potential. Understanding their differences can help you better align your investment decisions with your financial goals and risk profile.

What is Private Equity?

Private equity refers to investments made in companies that are not publicly traded. These investments typically target high-growth businesses, promising start-ups, or companies undergoing restructuring. Private equity funds generally pursue long-term strategies with active involvement aimed at enhancing the value of portfolio companies.

Key Advantages of Private Equity:

• High return potential through active participation in the management and development of businesses.
• Portfolio diversification, as these assets are not directly correlated to public market fluctuations.
• Access to innovative sectors, including technology, healthcare, and renewable energy.

Key Challenges:

• Low liquidity: funds are generally locked in for several years.
• Limited access: retail investors typically must go through specialized vehicles, often with high entry thresholds.
• Risk: the failure of a developing company can result in significant losses.

Accessing Private Equity Solutions

Retail investors seeking exposure to private equity may consider vehicles such as FCPR (Fonds Commun de Placement à Risques), FCPI (Innovation-focused investment funds), and FIP (Regional investment funds). These options support local businesses while offering potential tax advantages.
Crowdfunding is another alternative that enables broader participation in unlisted projects, albeit with higher associated risks.

Public Markets: Transparency and Accessibility

Public markets encompass listed equities and bonds, accessible to the majority of investors. Securities traded on these markets are subject to strict regulation, ensuring transparency and liquidity.

Key Advantages of Public Markets:

• Immediate liquidity: securities can be bought or sold quickly.
• Accessibility: individuals can invest with relatively low capital.
• Variety: broad exposure to different sectors and geographies.
• Tax benefits: capital gains exemption after five years via PEA (Plan d'Épargne en Actions), and favorable treatment under life insurance policies.

Key Challenges:

• Volatility: public markets are sensitive to economic and geopolitical shifts.
• Potentially lower returns than private equity over the long term.

Private Equity and Public Markets: Key Trends to Watch in 2025

As we look to 2025, investment strategies will evolve in response to shifting economic and technological dynamics. Staying informed will be crucial to capturing emerging opportunities and optimizing portfolio performance.

The Rise of Sustainable Investing

Sustainability is now central to investment strategies across both private equity and public markets. Private equity funds are increasingly backing companies involved in renewable energy and ecological transitions. Simultaneously, public markets are seeing a surge in capital toward green bonds and companies adhering to ESG (Environmental, Social, and Governance) standards.

The Growth of Artificial Intelligence

AI continues to draw strong investor interest. Private equity funds are financing disruptive start-ups developing cutting-edge AI solutions. On public markets, large tech firms dominate indices and attract substantial capital inflows.

Expanding Infrastructure Investment

Urbanization and the renewal of outdated infrastructure are driving increased investment in infrastructure-related projects. Key opportunities will include renewable energy, transport, and digital infrastructure.

Digitization of Investment

Fintech innovation is reshaping investment access. Digital platforms, blockchain technologies, and advanced data analytics are enabling greater transparency, broader access, and more sophisticated investment options. Adapting to these changes will be essential for staying ahead.

The Importance of Diversification

Given continued economic uncertainty, diversification remains key. More investors are combining private equity and public market exposures to optimize their risk/return balance.

Private Equity for Retail Investors: Greater Accessibility in 2025

One of the most notable trends in private equity is its increasing accessibility to retail investors. Funds such as those offered by Eurazeo are now available starting at €10,000, via diversified investment vehicles designed for individual investors. These options provide access to large-scale projects while benefiting from professional fund management.

Recent initiatives also allow for investments through popular savings wrappers, such as life insurance or retirement savings plans, further expanding access.

Risks in Public Markets and Private Equity

Public markets carry notable volatility risks, influenced by economic, political, and sector-specific factors. Investors may incur rapid losses during crises or market corrections, despite generally high liquidity. Poor corporate governance or underperformance can also erode returns.

Private equity exposes investors to higher risks, including illiquidity, capital loss, and risks related to operational management and company volatility. Future funding rounds may dilute ownership, and regulatory or tax changes may affect returns.

How to Invest in Private Equity and Public Markets in 2025

To capitalize on the opportunities offered by both markets, investors must adopt well-defined strategies. Choosing the right path based on individual objectives and risk tolerance is crucial for long-term success.

Aligning Strategy with Investment Goals

The decision between private equity and public markets depends on your investment objectives.
Investors targeting long-term growth and able to accept low liquidity may prefer private equity.
Those seeking quick access to capital may lean toward public markets.

The Role of Professional Guidance

Private equity demands in-depth expertise to identify and unlock the best opportunities. Public markets, though more accessible, also require robust analysis to navigate volatility. Engaging with financial advisors or wealth managers is key to making informed investment decisions.

Long-Term Investment Horizon

Patience pays off—both in private equity and public markets. Long-term investing helps weather short-term fluctuations and fosters capital appreciation.

Private Equity and Public Markets: A Winning Combination in 2025?

Rather than choosing one over the other, investors may consider a complementary approach. This strategy leverages:

• The high return potential of private equity for long-term, high-risk objectives.
• The liquidity and diversification of public markets for greater flexibility and short-term responsiveness.

In 2025, both segments will continue to present compelling opportunities. However, maximizing returns will require a clear understanding of their distinct characteristics and the implementation of a secure, tailored investment strategy.

This article was produced by Eurazeo Global Investor for informational purposes only. It should not be considered as a solicitation, an offer to buy or sell any financial products, or 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 alone serve as the basis for an investment decision. Please refer to the legal documentation of the referenced funds prior to making any final investment decision.

Past performance is not necessarily indicative of, nor a guarantee of, future results. Information regarding past investments is provided solely to illustrate the nature of these investments, as well as the associated strategy and process. There is no assurance that the same 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.