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Hewison Private Wealth - Insights
Hewison Insights

Public vs private equity.

Tess McIntosh
Senior Associate Adviser
23 Oct 2023

When it comes to building out the equity component of investment portfolios, public and private markets comprise the two sides of the coin, complementing each other and providing diversification, one of the most effective ways to manage risk and maximise returns.

Public equity holdings underpin the Australian Equity exposure for our portfolios. They provide liquidity, transparency, and the ability to opportunistically adjust positions. However, public markets have been known to overreact to macroeconomic conditions or geopolitical pressure and therefore can be volatile. This is where private equity holdings come into play.

Private equity investment involves investing in private companies that are not publicly traded. This includes startups, venture capital, private equity funds, and more. These assets offer unique advantages.

Firstly, private equity investments often have a lower correlation with public markets, meaning their performance tends to be less dependent on share market movements. This helps spread risk and can provide stability during market downturns.

Secondly, private equity investments can offer the opportunity for substantial returns. Investment in unlisted companies can yield significant gains, and private equity funds can deliver solid long-term returns.

However, private equity investments come with their own set of risks. They are less liquid and are used for longer term investment periods. Our experienced Investment Committee are consistently performing due diligence on new opportunities to confirm the appropriateness of various private equity funds on our Approved Product List. Our Wealth Advisers also ensure that each client portfolio contains the right equity mix for individual financial goals and objectives.

Including both private and public equity holdings in an investment portfolio offers a balanced approach to risk and return.

By combining these two investment profiles, investors can build a well-rounded portfolio that is better prepared to weather market fluctuations and achieve long-term financial performance.