Question 1

What is the difference between private markets and public markets?

Accepted Answer

“Public markets” is a collective term for assets which are traded on public exchanges – such as stocks on public stock markets and bonds on bond exchanges. “Private markets” is a collective term for private assets, including private equity, private credit, and private real assets like real estate and infrastructure. Private assets are not traded on public exchanges, requiring buyers and sellers to come to a mutual understanding of price before a transaction can occur.

Question 2

What are the main types of private market investments?

Accepted Answer

Private Equity: An investment in a privately held company to generate value with the end goal of exiting through an Initial Public Offering (IPO), merger, or sale. Private Debt: Providing loans directly to companies in privately negotiated transactions or acquiring these loans on the secondary market. Real Estate: A type of ‘real asset’ investment that includes the acquisition, financing, and ownership of physical properties or privately held companies that own, operate, or develop properties. Infrastructure: A type of ‘real asset’ investment that includes the acquisition, financing, and ownership physical assets or privately held companies that provide essential services to society, such as transportation, energy, or sewage.

Question 3

What is a closed-end fund?

Accepted Answer

A fund that has a fixed number of shares that are issued at inception and are not redeemable until the fund’s termination. These funds typically have a limited life with three phases: a fundraising period, investment period, and wind-down period.

Question 4

What is an evergreen fund?

Accepted Answer

An evergreen fund has no fixed termination date and can continuously raise and invest capital. When a sale is made in the fund, the cash is reinvested into new investments rather than returned to investors.

Question 5

Are there different types of private equity?

Accepted Answer

Yes, just like public or listed equity has different sectors and styles, so does private equity. These include, but are not limited to: Venture capital – Investments in early-stage companies that need capital for research & development and growth. These are new companies with unproven products that have the potential to be transformative. Growth Equity – Investments in maturing companies with existing revenues but in need of capital to expand. Companies will typically use the capital to facilitate growth and expansion of operations, assist team in transition, or finance a transforming event. Buyout – Investments in mature companies, typically with stable cash flows; investors typically acquire a controlling stake in an existing company, either by purchasing all or most of its shares or assets.

Question 6

What are the different types of real estate or infrastructure assets?

Accepted Answer

Core investment – A low-risk, low-return strategy that focuses on acquiring stable, high-quality assets with long-term leases/contracts and credit-worthy tenants/counterparties (e.g., Buy & Hold). Core investments provide investors with yield and modest capital appreciation; target returns typically range from 6-9%. Core plus – A low-to-moderate risk/return strategy that involves slightly lower quality assets than core, with some potential for value enhancement through renovations, repositioning, or increased occupancy (e.g., Buy → Improve → Hold). Core plus investors typically use moderate leverage (30% to 50%); target returns typically range from 9% to 13%. Value-Add – This is a moderate-to-high risk/return strategy that involves acquiring assets in need of significant improvements, and then increasing their value through active management, capital expenditures, or operational efficiencies (Buy → Fix → Sell). If the Value-Add investor is successful, the asset is typically de-risked and sold to a core investor on exit. Value-add investors typically use high leverage (up to 80%); target returns typically range from 13% to 15%. Opportunistic – This is a high-risk, high-return strategy that involves investing in distressed, undervalued, or niche assets that require extensive redevelopment, repositioning, or conversion (e.g., Buy→Fix→Sell). If an Opportunistic investor is successful, the asset is typically de-risked and sold to a core investor on exit. Opportunistic investors typically use very high leverage (up to 90%); target returns are typically 20%+.

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