Private Equity risks: what you need to know before investing

Private Equity offers attractive return opportunities, but it also presents specific risks that it is essential to understand before investing.

1. The risk of capital loss

Investments in the unlisted are not guaranteed. The funded company may fail to achieve its objectives, resulting in a partial or total loss of capital.

2. The liquidity risk

Private Equity fund units are generally not short-term saleable. The investor must be ready to lock in his capital for a period of 7 to 10 years.

3. The operational risk

Unlisted companies may be more vulnerable to economic vagaries, competition or dependence on their management team.

4. Credit and commitment risk

In a fund, capital calls can occur at any time. The investor must therefore anticipate its cash flow to meet its commitments.

Well controlled, these risks can be offset by diversification of investments and rigorous selection of funds.