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Private Equity (“capital investissement” in French) allows for investments to be made in companies not listed on the stock exchange. According to France Invest, the annualized performance over 10 years for this type of investment is 14.2%. Private Equity is thus an investment offering potential for high returns. Obviously, it is not suitable for all investors and should be used as a diversification tool.
1) Venture Capital (“Capital risque”)
The fund acquires a non-controlling share in a young company or start-up posting significant growth, as in the case of hi-tech start-ups. This type of investment is generally seen as the most uncertain, but can sometimes lead to appreciable success in terms of return on the investment.
2) Growth Capital (“Capital développement”)
The fund invests in a well-established company (several years old), of significant size and posting proven profitability, or close to financial stability. The aim is to reinforce the firm’s financial strength, enabling it to enter a new phase of growth.
3) Buy-out (“Capital transmission”)
This segment is private equity’s key component. It mainly occurs with the transfer or buy-out of a company. This type of operation is frequently associated with debt financing and is known as an LBO (Leverage Buy-Out).
4) Turnaround (“Capital Retournement”)
Funds invested in a company in difficulty. Cash contributions are used to finance a company’s turnaround.
One should be aware that Private Equity is, by its very nature, less exposed to volatility on stock markets for several reasons: these companies are not listed on the stock exchange and their valuations do not fluctuate daily in keeping with the market; funds are commonly closed for several years, so investments are made without any possibility of withdrawal on the horizon, which stabilizes the capital; a company’s valuation is based on fundamentals (growth, margins, financial health, structure of the business model etc…) and long cycles; finally, the companies selected can introduce additional diversification as they may belong to very specific sectors, potentially under-represented on the stock market.
Contact Vaneau Gestion Privée financial advisors to check that this investment is well-suited to your situation. Vaneau Gestion Privée also disposes of a selection of some of the finest Private Equity funds in the world.
VANEAU GESTION PRIVÉE
50 rue de Châteaudun, 75009 Paris
+33 (0)1 45 03 80 95 | www.vaneaugp.fr
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