When to Consider Private Equity
At Cool Wealth Management in Phoenix, Arizona, we often help clients explore investment opportunities beyond the public markets. One area that’s gaining attention among high-net-worth individuals and business owners is private equity. Private equity investing involves buying ownership in private companies with the goal of achieving long-term capital appreciation. If you're looking to diversify your portfolio, improve risk-adjusted returns, or gain exposure to emerging companies before they go public, private equity may be worth considering.
What Is Private Equity?
Private equity refers to investments made directly into private companies or buyouts of public companies that result in their delisting. Investors typically gain equity ownership, and their capital is used to grow the business, improve operations, or restructure it. In return, investors aim for higher returns than they’d get in traditional public markets.
These investments are commonly made through private equity funds, which pool investor capital and are managed by professional firms. The funds often have a long lock-up period, ranging from 7 to 10 years, and are illiquid by nature.
When Private Equity Might Be a Good Fit
Private equity isn’t right for everyone, but it may be a strong option if:
You’re a high-net-worth investor: Many private equity funds have minimums of $250,000 or more.
You want to diversify beyond public markets: PE can help reduce exposure to stock market volatility.
You have a long investment horizon: These funds often require a multi-year commitment.
You’re comfortable with illiquidity: You won’t have regular access to your capital.
You want exposure to innovation or turnaround opportunities: PE funds often invest in high-growth or undervalued companies.
Benefits of Private Equity
Potential for Higher Returns: Because of the hands-on management and growth focus, private equity has historically outperformed public markets in certain time periods.
Diversification: Private equity offers exposure to asset classes that don’t always move with traditional stocks or bonds.
Access to Exclusive Deals: Accredited investors may be invited to participate in specialized opportunities not available to the public.
Risks to Be Aware Of
Illiquidity: You can’t easily sell your stake before the fund ends.
Lack of Transparency: These investments are not as heavily regulated or reported as public securities.
Higher Fees: Management and performance fees can be significant.
Concentration Risk: A single company’s poor performance can heavily impact the fund.
How to Get Started
At Cool Wealth Management, we can help you determine whether private equity fits into your broader financial plan. We evaluate:
Your liquidity needs
Risk tolerance
Investment timeline
Existing asset allocation
For clients who qualify and are interested, we offer access to vetted private equity opportunities that align with their goals.
Final Thoughts
Private equity is not a one-size-fits-all solution. But for the right investor — typically one with significant assets, long-term goals, and a desire for diversification — it can be a compelling way to grow wealth over time. If you’re curious whether private equity makes sense in your financial plan, we’d be happy to walk you through the options.
