Recent market volatility has seen pundits calling the end of the private-equity boom, but that is to misunderstand the true nature of private equity. While a few big, extravagantly priced deals might founder due to tighter debt markets, further down the scale, the industry is likely to continue to prosper.
However, the way in which private equity works is a little opaque. Over the past year, a lot has been written on the ins and outs, illustrating how its participants pay tax, its advantages and its drawbacks. But hard advice for private investors wanting a piece of the action is still thin on the ground.
The main problem is that private-equity players are even less interested than hedge-fund groups in getting money from private investors. In reality, many have so much money to invest on behalf of big institutions that they don't give private investors a second thought. But that's not to say that private investors need to exclude themselves from the private-equity investment trust (Peits) scene. There are a dozen or more listed investment trusts that invest in private equity, including some of the biggest names. What's more, buying and selling their shares is a simple matter, and some of the shares offer an interesting value proposition after recent market declines.