A newly launched French fund offers a means for small private investors to take an interest in private equity. Cypriots can invest too.
This is a good opportunity, because the average return on an investment in private equity, which involves the takeover and restructuring of loss-making companies to make them profitable – is 15 per cent on average. But returns are often much higher.
The fund has been created by the Banque Publique d’Investissement (BPI), a state-backed investment bank with a mandate to drive growth in the French economy with strategic investments.
BPI starts out by creating a fund portfolio which invests in about 1,500 companies, from startups to the most mature, as the fund explains on its website. These are brought together by 145 partner funds. A five per cent portion of this of this entire portfolio is offered to the small investor, thus delivering a representative, multisectoral and diversified product.
To determine the value of this fund, another portion of it will be sold to institutional investors: Two have already been selected to buy into the fund, and the purchase will determine the pricing.
Retail investors have been able to buy in with a €5,000-minimum payment – quite a small amount for an investment of this type. The maximum investment is €75,000. Professional investors are not permitted to participate, however, so the field is open to retail investors everywhere.
But is it worth it?
“The issue with investing is that it almost seems to have a two-tier system: Institutions and corporate investors have access to significantly leverage their funds, meaning their ability to find rich opportunities is vast; but for a smaller retail investor, access to these opportunities, of which private equity is one, and other large funding is extremely difficult to access.”
While this could be considered normal, it would appear that without access to private equity or institutional funding, smaller investors have no real option but to stay small,” comments Cypriot entrepreneur Andrew Anastasiou.
Retail investors should take note that they cannot withdraw their investments in the private-equity fund before the full term of six years. This is because the return on investment only comes in full at maturity.
But it isn’t for everyone, professionals warn. “Cypriots interested in this kind of investment should think carefully before making a commitment,” says Gillian Richards, of the Limassol-based advisors Chase Buchanan. “It does entail a lot of risk, so they should study it carefully and limit the amount of their investment to what they can afford to lose.”