Private Equity: Definition, Access and Risks for Private Investors

Private equity is equity capital invested in unlisted companies, usually pooled in a fund with a long investment horizon. In Switzerland, most vehicles are open only to qualified investors. Art. 10 of the Collective Investment Schemes Act (CISA) sets out who qualifies.

For a long time, this asset class was reserved for pension funds, foundations and very wealthy families. Today wealthy private clients invest as well, for example through a discretionary mandate or semi-liquid funds. In classic funds, capital often stays tied up for ten years. In 2026, moreover, a large evergreen fund run by Partners Group limited redemptions.

Key facts in brief

• Private equity is equity capital invested in unlisted companies. Private markets also include private debt, private real estate and infrastructure.
• Global private equity deal value rose 19 percent in 2025 to around 2.6 trillion US dollars (McKinsey Global Private Markets Report 2026).
• Distributions from buy-out funds to their investors came to 14 percent of net asset value in 2025, the fourth year in a row below 15 percent (Bain Global Private Equity Report 2026).
• Most private equity funds are open only to qualified investors. Opting out of retail client status to be treated as a professional client requires assets of at least CHF 500,000 plus the relevant knowledge, or at least CHF 2 million (Art. 5 para. 2 of the Financial Services Act, FinSA).
• In the Partners Group Global Value SICAV, an evergreen fund, redemption requests in the second quarter of 2026 came to around 9.8 percent of net asset value. The fund applied its 5 percent quarterly limit (Partners Group, 4 June 2026).

Definition: What is private equity?

The name combines private (not publicly traded) and equity (ownership capital). Private equity is equity capital invested in unlisted companies. Private equity firms use the money they raise to take direct stakes in companies, with the aim of long-term value creation.

In private equity, investments in start-ups are called venture capital, which is riskier by nature. Unlike the shareholders of a listed company, a private equity firm directly influences the operating business of the target company, for instance through:

• Developing the existing corporate strategy
• Sharing expertise
• Streamlining operations
• Expanding into new products and markets

The history of private equity begins after the Second World War. In 1946 the American Research and Development Corporation (ARDC) was founded in Boston, one of the first firms to raise capital from institutional investors to back young companies.

Today private equity is counted among the private markets, which comprise four main segments:

• Private equity: stakes in unlisted companies
• Private debt: direct lending to companies
• Private real estate: investments in real estate projects
• Infrastructure: stakes in infrastructure assets

How large is the private equity market today?

According to the McKinsey Global Private Markets Report 2026, global private equity deal value rose 19 percent in 2025 to around 2.6 trillion US dollars. Exits picked up as well: their value reached around 1.3 trillion US dollars in 2025, the second-highest figure ever recorded.

The Bain Global Private Equity Report 2026 puts distributions from buy-out funds to their investors at 14 percent of net asset value in 2025, the fourth year in a row below 15 percent. According to the same report, buy-out funds hold around 32,000 portfolio companies that have not yet been sold, worth 3.8 trillion US dollars. The holding period before exit is now about seven years, compared with an average of five to six years from 2010 to 2021.

How does private equity work?

A private equity fund raises capital commitments from investors, uses them to buy majority or significant minority stakes in unlisted companies, and sells these stakes again after a few years. The return comes from the difference between the purchase and the sale price. In between, the fund manager works with the company’s management on strategy, costs or add-on acquisitions. Any additional funding comes from banks and other lenders as debt.

Funds are classified by the stage of the company they invest in:

• Venture capital for a start-up with a promising business model
• Growth capital when a company expands into new markets or product lines
• Buy-out financing for the acquisition of an established company

Banks rarely lend to young companies before they have a proven track record. In buy-outs, by contrast, debt is an integral part of the financing. Two common forms are the leveraged buy-out (LBO) and the management buy-out (MBO).

Leveraged buy-out (LBO)

In an LBO, most of the purchase price for the target company is financed with loans. The debt is then placed on the target company’s balance sheet. The loans are repaid from the cash flow of the acquired company.

Management buy-out (MBO)

In an MBO, the deal is initiated by the company’s own management. The trigger can be a succession or a restructuring that the current owners do not carry out themselves. The capital comes from the management team and from one or more private equity firms.

How does capital flow in a private equity fund?

In a classic private equity fund, investors do not pay in the full amount at once. They make a capital commitment, which the fund draws down over several years as it invests. Distributions flow back only when holdings are sold. Investors therefore have to keep the committed amount available for years.

The process has three phases:

• Investment phase: in the first years, the fund draws down commitments in tranches through capital calls. If an investor does not meet a call on time, the fund documents usually provide for penalties.
• Holding phase: the fund develops the companies. Fees are already being charged, but there is hardly any income yet.
• Exit phase: sales and IPOs bring distributions back to investors.

Because costs are incurred in the first years, before gains are realised, the performance of a young fund often shows a loss at first. This pattern is called the J-curve. Investors who subscribe to funds of different vintages (launch years) spread their payments in and out over time. How management fee, hurdle rate and carried interest interact is explained in our article on the costs of private markets funds.

Besides the initial subscription to a new fund (primary), there are two further routes. Through secondaries, an investor buys existing fund interests from other investors. The capital is then already invested, and the J-curve is shorter. In co-investments, the investor takes a direct stake in a single company alongside a fund. The risk is then concentrated in one firm.

How does private equity make money?

Private equity makes money when a company is worth more at sale than at purchase. The added value comes from three sources. Revenue and profit rise during the holding period. The buyer pays a higher valuation multiple at sale. And debt that financed part of the purchase price is repaid from the company’s cash flow.

How well a fund uses these levers depends heavily on the manager. According to the J.P. Morgan Guide to Alternatives (Q3 2026), the ten-year return (IRR) of private equity funds was 1.1 percent at the 25th percentile and 20.4 percent at the 75th percentile, a spread of 19.3 percentage points. For global large-cap equity funds the same spread was 3.6 percentage points. The two figures are measured differently: equity funds by annual return, private equity by IRR.

How does private equity differ from shares?

Like a share, private equity is an ownership stake in a company. But the companies are not listed on a stock exchange, the units have no daily market price, and they can hardly be sold during the fund’s term. The private equity firm also directly influences management, which the shareholders of a listed company usually cannot.

Whether an investment in private equity ends up outperforming listed shares depends on fund selection, entry timing and holding period, and cannot be predicted.

Opportunities and risks of private equity

Among financial investments, private equity is not a core holding and requires a long investment horizon. The risk of loss is high and can, in exceptional cases, lead to a total loss of the invested capital. These risks need to be weighed before any investment decision:

• Liquidity risk: the capital is committed for the entire term and not freely available.
• Valuation risk: unlisted holdings have no daily market price.
• Fees: the management fee and the manager’s carried interest reduce the net return.
• Manager selection risk: results differ widely between funds.
• Risk of total loss: target companies can become insolvent. In a fund with few holdings, that can cost a large part of the capital.
• Limited transparency: investors often see little of the underlying transactions.
• Lack of control: investors have no influence on the fund’s decisions during the term.
• Currency risk: many funds are denominated in US dollars or euros.

The opportunities of private equity lie in access to companies that are not available on the stock exchange, and in the active value creation by the investment firm. Because valuations are smoothed, historical figures show only partly how far private equity diversifies a portfolio.

How is private equity valued?

Private equity holdings are not traded on an exchange, so the fund manager estimates their value. The valuation standard is fair value under the guidelines of the International Private Equity and Venture Capital Valuation Board (IPEV), that is, the price that would be received in an orderly sale on the reporting date. This gives the fund’s net asset value (NAV), usually monthly or quarterly.

In practice, the valuation draws on values of comparable listed companies, on comparable transactions and on cash flow models. It lags the market. When stock markets fall, the reported NAV falls later and by less. Reported returns therefore fluctuate less than the economic value of the holdings. The low volatility in private equity statistics is partly a result of this smoothing and not a sign of lower risk.

Rising interest rates reduce the value of the holdings, because earnings that only materialise in a few years are worth less today. This effect also feeds through to the NAV with a lag. In semi-liquid funds, this delay redistributes value between investors. If the NAV still stands above the economic value after a price decline, an investor who redeems receives more than their units are currently worth, and the remaining investors bear the difference. After a rise in prices, it is the other way round.

Who can invest in private equity in Switzerland?

In Switzerland, access depends mainly on investor status. Most private equity funds are open only to qualified investors, which includes professional clients and retail clients with a long-term asset management or investment advisory relationship with a supervised financial intermediary. Institutional funds, which target mainly institutional investors and family offices, also often require a minimum subscription of CHF 250,000 or more.

ETFs on listed private equity companies are open to all investors and can be traded daily. But they track the asset class only indirectly, because they hold the shares of the listed companies and not the underlying stakes. Funds of funds, which invest in several private equity funds, add a second layer of fees.

Who counts as a qualified investor in Switzerland?

Professional clients are qualified investors. In addition, under Art. 10 para. 3ter CISA, retail clients count as qualified investors if they have a long-term asset management or investment advisory relationship with a supervised financial intermediary, unless they have declared that they do not wish to be treated as qualified investors. They must make this declaration in writing or in another form that can be evidenced by text.

Without such a relationship, the route is to opt out under Art. 5 para. 2 FinSA. The law then requires either the knowledge needed to understand the risks associated with the investments together with assets of at least CHF 500,000, or assets of at least CHF 2 million. The same formal requirement applies to the opting-out declaration under FinSA.

Which fund rules apply in Switzerland?

Which private equity funds an investor in Switzerland may buy is governed mainly by the CISA. It requires FINMA approval when a foreign fund is offered to non-qualified investors. It also provides for the L-QIF, a fund type for qualified investors only. For pension funds, the Ordinance on Occupational Old Age, Survivors’ and Invalidity Pension Provision (BVV2) sets its own limits.

• Limited Qualified Investor Fund (L-QIF): this Swiss fund type has existed since 1 March 2024. Under Art. 118a CISA, an L-QIF is open exclusively to qualified investors and needs neither authorization nor approval from FINMA. It is managed by a fund management company or a manager of collective assets, both of which are themselves supervised.
• Foreign funds: if a foreign fund, including a European ELTIF, is offered in Switzerland to non-qualified investors, it needs FINMA approval (Art. 120 CISA). For an offer to qualified investors only, this approval is not required.
• Pension funds: under Art. 53 para. 1 BVV2, private equity counts as an alternative investment, capped under Art. 55 BVV2 at 15 percent of total assets. Since 1 January 2022 there has also been a separate category for private equity and private debt in unlisted Swiss companies, with a cap of 5 percent.

Access routes for Swiss private investors

Access runs through different fund types or through investor status:

• Semi-liquid funds: evergreen funds accept new money on an ongoing basis and allow redemptions at fixed intervals, with lower minimums than classic funds. Redemptions are capped (see the next section).
• Classic closed-end funds: the capital commitment covers the entire term and is called in tranches, often from CHF 250,000.
• Secondaries and co-investments: mostly through specialised funds or alongside existing fund investments.
• Through a discretionary mandate: retail clients in a long-term asset management relationship with a supervised financial intermediary count as qualified investors under Art. 10 para. 3ter CISA, unless they have declared that they do not wish to be treated as qualified investors. Everon has its own portfolio management team and offers Private Markets as a separate service.

What happens when many investors try to leave an evergreen fund at once?

Evergreen funds cap redemptions per period at a fixed share of net asset value. If requests exceed the cap, they are scaled back pro rata and, depending on the fund, deferred to later dates. This mechanism is called gating. It protects the remaining investors from forced sales of holdings under time pressure.

One example is the Global Value SICAV, an evergreen fund from Partners Group governed by Luxembourg law. In the second quarter of 2026, redemption requests reached around 9.8 percent of net asset value. According to the prospectus, net redemptions are capped at 5 percent of net asset value per calendar quarter, and on 4 June 2026 Partners Group announced that it would apply this cap. As a result, requests above the cap were not fulfilled in that quarter.

On 2 October 2026, Partners Group announced plans to split the fund into two sub-portfolios: one that reinvests income and one that distributes proceeds from sales. The plan is subject to shareholder approval (Partners Group, press release of 2 October 2026).

Each evergreen fund sets out in its prospectus the redemption cap, the liquidity buffer, the credit line and how scaled-back requests are handled.

How do private equity funds differ?

Private equity funds differ mainly by company stage, sector, region and the size of the target companies. Venture capital funds finance young firms with a high risk of failure, growth funds the expansion of established companies, and buy-out funds the acquisition of whole companies. Each fund sets these priorities in its documents before subscription.

Checklist before a first private equity investment

A private equity fund’s documents answer most of the questions an investor has before subscribing. These points are covered there or can be requested from the provider:

• Term of the fund and the earliest point at which capital can flow back
• Size and timing of the capital calls
• The manager’s experience and the track record of earlier funds
• Strategy, sectors and regions in which the fund invests
• All fees, including the manager’s carried interest
• For evergreen funds, the redemption cap, the liquidity buffer and how scaled-back requests are handled
• Fund currency and domicile

Conclusion on private equity

Private equity is equity capital invested in unlisted companies. A fund raises capital commitments, calls them over several years and returns capital only when investments are sold. In Switzerland, access depends mainly on status as a qualified investor. Retail clients can also gain access through a long-term asset management relationship with a supervised financial intermediary.

In 2025, distributions from buy-out funds stayed below 15 percent of net asset value for the fourth year in a row. In 2026, a Partners Group evergreen fund capped redemptions at 5 percent per quarter when requests stood at around 9.8 percent.

Related reading in our journal:

• Costs of private markets funds
• Types of asset management mandates
• More about private banking

Frequently asked questions about private equity

What is private equity in simple terms?

Private equity is equity capital invested in companies that are not listed on a stock exchange. Investors usually pool their capital in a fund. The fund acquires stakes in target companies, works to raise their value over several years and then sells the holding. Alongside private debt, private real estate and infrastructure, private equity is one of the four segments of private markets.

Who can invest in private equity in Switzerland?

Most private equity funds are open only to qualified investors. Under Art. 10 para. 3ter CISA, this includes retail clients who have a long-term asset management or investment advisory relationship with a supervised financial intermediary, unless they have declared that they do not wish to be treated as qualified investors. Without such a relationship, the route is to opt out under Art. 5 para. 2 FinSA.

What is the minimum investment for private equity?

For classic institutional private equity funds in Switzerland, the minimum subscription is often CHF 250,000 or more. Semi-liquid evergreen funds and funds of funds set lower minimums, which vary by provider. ETFs on listed private equity companies track the asset class only indirectly and have no minimum subscription.

What are the risks of private equity?

The main risks are illiquidity for many years, limited transparency, high fees, valuations that lag the market and wide differences between fund managers. In the worst case, the entire invested capital can be lost. The committed capital is not available for the entire term.

How long is capital tied up in private equity?

Classic private equity funds typically run for around ten years, and during that time the units cannot be sold on an exchange. Evergreen funds allow redemptions at fixed intervals but usually cap them at a percentage of fund assets per quarter. If requests exceed the cap, they are scaled back and, depending on the fund, deferred to later dates.