Active Value Creation and Correlation Effects

Private Equity refers to ownership stakes in companies that are not publicly traded. In the past, such investments were primarily made by institutional investors such as pension funds and by high-net-worth individuals. Today, however, private equity has become more accessible thanks to reduced regulatory and financial barriers.

Private equity funds are typically closed-end vehicles with a lifespan of eight to twelve years. Investors commit capital that is drawn down over a period of four to six years while the fund manager selects and acquires investments. Usually, eight to twelve companies are purchased, which are then sold after five to seven years. The proceeds from these sales are returned to investors.

The growing trend toward alternative investments enables private companies to expand and remain unlisted for longer. As a result, initial public offerings now tend to occur later in a company’s lifecycle and on a larger scale than was common before the turn of the millennium.

Private equity investors typically hold majority stakes, enabling them to actively influence corporate strategy. Drawing on their operational expertise, they enhance company value through efficiency gains, scaling, market expansion, and “buy-and-build” strategies. As long-term owners with real commitment (“skin in the game”), fund managers work closely with management teams to achieve sustainable value creation.

Over time, the private equity asset class has delivered above-average returns while maintaining a low correlation with public markets. During periods of crisis—such as the 2008 financial downturn or the COVID-19 pandemic—its performance exhibited significantly lower volatility.

Venture Capital

Financing very young companies with high growth potential, which may have little or no revenue yet. Venture capital can be further divided into three stages: seed stage, early stage, and late stage. Due to its inherently higher risk profile, venture capital is considered the most speculative form of private equity investment.

Growth Capital

Provision of capital to companies that are already established and generating revenues and operating profits. However, they may lack the financial resources needed to accelerate growth or pursue acquisitions. This growth capital is provided by investors and is typically characterized by minority shareholdings that do not involve taking control of the company.

Buyout

The acquisition of an established company that is not listed on the stock exchange or is intended to be taken private. The private equity manager aims to actively influence the company by implementing restructuring measures, scaling costs, or expanding into new markets. Buyout transactions are typically financed partly with debt. The most significant types of buyout transactions are as follows: i) LBO (Leveraged Buyout), in which the acquisition of the company is financed through debt, ii) MBI (Management Buy-In), in which a new management team acquires an existing company, or iii) MBO (Management Buyout), in which the existing management team takes ownership of the company.

Performance and valuation

The most important key figures in private equity are the Internal Rate of Return (IRR) and multiples. The IRR takes into account all cash inflows and outflows over time and indicates the discount rate at which the net present value equals zero. Multiples, on the other hand, measure the ratio of return to invested capital without considering the timing of payments. The key metrics include:

RV/PI – Residual Value to Paid-In, or residual value to paid-in capital

D/PI – Distributions to Paid-In, or distributions to paid-in capital

TV/PI – Total Value to Paid-In, or total value to paid-in capital

Private equity funds are valued based on their Net Asset Value (NAV), as their holdings are not publicly traded. Valuations are carried out quarterly by the fund managers and are based on business data such as revenue and profit, as well as methods like discounted cash flow analysis or peer comparisons.

This approach provides a realistic, fair, and transparent basis for the valuation and comparison of private equity investments. Our private equity experts independently assess direct investments and co-investments through due diligence, without relying on third-party providers.

Private Equity in the Portfolio Context

Private equity offers high return potential but comes with higher risk and lower liquidity. A well-diversified portfolio is therefore essential. The committed capital is not drawn immediately but over a period of four to six years. The optimal allocation depends on the investor’s risk tolerance and return objectives. Diversification across investment styles, managers, industries, regions, and vintage years can help reduce risk and enhance the return profile.

Private Equity – Our Approach

We provide our clients with access to leading private equity managers and invest alongside them. All managers are carefully vetted and benchmarked against their peer group to identify the best-in-class performers. Throughout the entire fund lifecycle, we monitor performance, maintain close dialogue with the managers, and keep our investors continuously informed about developments.

Access to Exclusive Investments

Thanks to our extensive network and many years of experience, we are able to identify the best managers for you. In addition, our close relationships with selected fund managers provide you with access to exceptional co-investment opportunities.

Sector Focus	Healthcare, B2B Business Services, Technology, and Education
Investment Topics	Digitalization, Professionalization, Increasing Life Expectancy/Longevity
Geographical Focus	Focus on Western Europe and North America
Investment Scope	≥ CHF 5 million per mandate
Investment Objective	8–12 investments in the target portfolio
Investment Team	Investment team that also invests personally in the fund (“alignment of interests”) and thus participates in the fund’s success