Private equity and impact to give meaning to your investments

👀 Reading time: 5 minutes

Are you familiar with private equity, the investment strategy that involves holding shares in the capital of unlisted companies? It now aims to be greener in order to contribute to the ecological transition. Enerfip Gestion explains the role of private equity and what it can bring you in diversifying your portfolio!

Understanding private equity

🤔 What is it?

Private equity, also known as “Private equity” involves taking majority or minority stakes in unlisted companies over a 3- to 10-year period. Why? By investing in small or medium-sized businesses, you contribute to their growth by accelerating their development and increasing their performance.

Your goal? To achieve a significant capital gain when selling part or all of your stakes.

‍The different forms of private equity

📈 Venture capital

Venture capital, also known as venture capital (VC), is intended for companies that are starting up or are at the beginning of their business development, such as startups. Of course, the company in question must be growing!

As an investor, you provide capital to quickly finance innovation and rapid growth of the company, despite a high risk given the uncertainty associated with the success of start-ups.

🚀 Growth capital

Growth capital mainly concerns established companies looking to finance their expansion or enter new markets.

If you decide to invest in such a project, your objective will be to finance geographic expansion or support the growth of the said company. It is therefore an investment with a generally lower risk than venture capital, because the company already has a solid foundation.

📊 Leveraged buyout

Leveraged buyout (LBO) consists of acquiring a company financed mainly by debt. The fact that it is undervalued or underperforming favors your operation, as well as its recovery and restructuring.

This buyout strategy allows you to take control of a company, despite a limited capital contribution. Your objective, of course, is to aim for a capital gain upon resale.

The Private Equity Market

Before investing in private equity, you are probably wondering if it is the right time. How is the private equity market doing?

Shaped by recent trends and sector developments, the private equity industry has achieved record amounts of capital. Today, it represents $3 trillion globally. Furthermore, capital raised by private equity and private debt funds from investors has reached $662 billion. We note that, even though it is a market of small and medium-sized enterprises, it arouses strong interest among investors. In 2024, we note that investment decisions in private equity are influenced by:

• the economic recovery after a crisis period, such as covid-19 or the war in Ukraine;
• technological innovation, particularly in the field of renewable energy or health;
• interest and liquidity rates, particularly due to the different monetary policies adopted by central banks;
• a desire to diversify portfolios by balancing risky investments with investments in sectors less sensitive to economic cycles;
• a desire to invest sustainably in private equity funds that integrate sustainable and ethical practices into their business model, like Enerfip Gestion.

The importance of private equity in fundraising

Are you familiar with the principle of fundraising? This is the strategy that consists of seeking investors or institutions likely to invest in the capital of a company, with predefined exit conditions. During fundraising, you arrive either at the start of the project, service or product, or during the development of the activity.

Since each stage of fundraising corresponds to a specific need, the amount raised increases as the company evolves. If you invest in the capital at the beginning of its growth, when its potential is still untapped, you will help make it profitable and sustainable.

Why have private equity in your portfolio?

👛 Diversify your portfolio

First and foremost, it is essential to choose the investment option that best suits you. To do this, it is essential to know your investor profile and your risk tolerance. Knowing that private equity is a long-term investment that requires a certain financial stability, it allows you to diversify your sources of return, while having access to innovative or rapidly growing sectors.

⚖️ Evaluate the risk-return ratio

Investing in a private equity fund must be carefully considered. Because, even if it offers higher returns than public equity markets, it faces significant illiquidity and high risk. What are they due to? Particularly the complexity and cost of private equity investment structures, which often involve management and performance fees.

Invest in private equity with Enerfip Gestion

As a management company Specializing in infrastructure and private equity, Enerfip Gestion offers investment solutions that contribute to a more sustainable and inclusive economy.

Our strategy?Support the development of French and European SMEs through investments in alternative asset classes (on the one hand, traditional debt and, on the other, private equity in renewable energy infrastructure and in the capital of the companies that develop them). Our management company thus focuses on financing projects dedicated to the energy transition in Europe, by promoting small and medium-sized initiatives. As a signatory of the UNPRI, we aim to invest in a diversified portfolio of projects, with an emphasis on solar and wind power, as well as energy efficiency.

For any further information, do not hesitate to contact us! Our dedicated team will be delighted to assist you in your responsible private equity investment efforts.