Private Equity: Definition, Access and Risks for Private Investors

Private equity is private investment capital placed in companies that are not listed on a stock exchange, usually pooled in a fund with a long investment horizon. Swiss private investors can now gain access through exchange-traded ETFs, semi-liquid funds and specialized private market structures, in some cases from just a few hundred francs.

For a long time, this asset class was reserved for institutional investors and very wealthy families. Private markets have changed: new access channels and fund structures are opening private equity to qualified private investors. This guide explains what private equity is, how you as a private investor can gain access, and which minimum investments, illiquidity and risks you should keep in mind.

The most important facts in brief

For your better orientation, we have summarized the key points on private equity.

• Private equity is private, off-market investment capital.
• Private markets include private equity, private debt, private real estate, and infrastructure.
• The capital is invested in companies with the aim of long-term value creation.
• Behind the capital are investors who invest their assets in companies through investment companies.
• Private equity requires experience and expertise: selecting the right funds and strategies is crucial.
• Swiss private investors now have access via ETFs, semi-liquid funds, and specialized private market structures.
• The committed capital is tied up and illiquid for many years.

Definition: What is private equity?

The term private equity comes from English and combines private and equity. It thus describes private investment capital or off-market equity capital. Private equity firms use the money they raise to invest directly in stakes in companies, with the aim of long-term value creation.

Investments in start-ups (young companies) are referred to in the private equity context as venture capital, which by its nature carries a higher risk. The difference from other forms of investment lies in the investor’s direct influence on the operating business of the target company. This includes measures such as:

• Further development of the existing corporate strategy
• Provision of know-how
• Optimization of work processes
• Expansion into new products and markets

Investment companies in Switzerland active in private equity are interested in long-term investment with sustainable corporate success. Short-term speculative gains are not the focus. In other forms of investment, the emphasis is more on shareholder returns without direct influence on management.

The history of private equity begins after the Second World War. The American Research and Development Corporation (ARDC), founded in Boston in 1946, was the first to raise institutional capital for investments in newly founded companies. A defining success story is an investment of around 70,000 US dollars in Digital Equipment Corporation in 1957. By 1971, that stake had grown to a market value of several hundred million US dollars and remains a textbook example of the effect of private equity to this day.

Today, private equity is usually viewed in the context of private markets. These comprise four main areas:

• 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

This diversification enables investors to invest more selectively across different risk classes.

How large are private markets today?

Private markets have grown strongly over recent years. 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, with buy-out deal value alone reaching nearly 1.8 trillion US dollars. Exit activity also picked up sharply: the value of private equity exits reached around 1.3 trillion US dollars in 2025, the second-highest figure ever recorded. This shows that private equity is now an established part of globally diversified portfolios and no longer solely a niche for institutional investors.

How does private equity work?

Money is collected from wealthy investors and pooled to form a fund in the private equity sector. The fund subsequently acquires stakes in one or more target companies. Any additional capital required is provided by banks or external investors as part of a co-financing arrangement. The investment aims to increase the profitability of the target companies through appropriate measures. After a certain holding period, the investment is sold and liquidated at a profit.

Company investments by private equity funds follow different patterns. The goal is usually a significant majority stake in order to influence the target company. In the case of listed companies, a blocking minority is often sought as a first step. Because key resolutions at the general meeting require a qualified two-thirds majority under Swiss company law, this threshold sits at more than one third of the votes represented, which means that no qualified majority resolution can be passed against the new shareholder.

In the corporate phases of a company’s development, there are further uses of private equity. A distinction is made between:

• Venture capital for a start-up with a promising business model
• Growth capital when a company expands into new markets or product lines

In both cases, traditional lending banks are risk-averse and usually provide debt capital only after a successful market entry.

The second area of private equity in Switzerland involves participation in buy-out financing. The best-known forms are:

• Leveraged buy-out (LBO)
• Management buy-out (MBO)

Leveraged buy-out (LBO)

In an LBO, the majority of the purchase price for the target company is financed through loans. The resulting liabilities are charged to the target company. The loans are repaid from the cash flow of the acquired company.

Management buy-out (MBO)

In an MBO, the initiator is the company’s own management. The trigger can be, for example, a succession arrangement or a restructuring that the previous shareholders do not carry out. The financing capital is provided by the management itself and largely by private equity firms.

Classification, delimitation, and comparison with other forms of finance

The main objective of private equity is equity investments in companies that are not listed on a stock exchange. In connection with private equity, there are two main directions for the targeted investments:

• Buy-out
• Venture capital (VC)

In terms of the financial instrument, private equity aims at the equity investment in order to gain direct access to the target company. A pure minority stake is only rarely sought.

In terms of investment approach, private equity differs significantly from an investment in shares of listed companies. Anyone investing in this asset class accepts a long capital commitment in exchange for the return potential of unlisted stakes. Whether an investment in private equity ultimately performs better than a direct investment in shares depends heavily on fund selection, entry timing and holding period, and cannot be guaranteed in advance.

Venture capital is mostly used in connection with start-ups with high growth potential. Private equity provides the basis for the equity capital here. Because growth financing for young companies is often associated with high risks, the use of debt capital by banks is rare.

Opportunities and risks of private equity

An investment in private equity is not a basic investment for every capital investor. It requires experience in dealing with financial investments and a long investment horizon. The investor takes on a high financial risk that can, in exceptional cases, lead to a total loss of the invested capital. You should consider these risks before making an investment decision:

• Liquidity risk: the capital is committed for the entire term and not freely available.
• Valuation risk: unlisted stakes cannot be valued on a daily basis.
• Cost risk: high management and distribution fees reduce the net return.
• Total loss risk: insolvency of the target companies cannot be ruled out.
• Transparency risk: there is often only limited insight into the transactions carried out.
• Dependence: investors have no influence on the fund’s decisions during the term.

Investments in private equity are considered long-term investments in tangible assets. While you can sell shares on any trading day, this is not possible with private equity. The private equity fund invests its assets on a long-term, illiquid basis in unlisted companies. This creates the additional risk for the investor of not being able to liquidate the investment in the short term.

The opportunities offered by private equity lie in access to companies that are not available on the stock exchange, as well as in active value creation by the investment company. Investment professionals look specifically for young companies with forward-looking business ideas or for undervalued firms with development potential. Historically, private equity has contributed to the diversification of broadly spread portfolios over long periods. A specific return cannot be derived from this, however, and past performance is no guarantee of future results.

At the end of the investment horizon, the stake is sold or placed on the stock exchange. The resulting increase in value is added to the investment capital, similar to an investment in real estate, after which repayment is made to the investor.

ESG and sustainability

ESG criteria (Environmental, Social, Governance) are increasingly shaping private equity investments. Swiss providers are integrating sustainability aspects into their selection processes:

• Impact investing: targeted investments in companies with a positive social contribution
• ESG integration: consideration of environmental and social criteria in investment decisions
• Active ownership: private equity firms drive ESG improvements in portfolio companies

For sustainability-oriented investors, this opens up the possibility of combining returns and impact.

Regulatory developments

The regulatory landscape is changing:

• Wider access: new fund structures such as the European ELTIF 2.0 and semi-liquid evergreen funds lower the entry barriers for private investors.
• Transparency regulations: increased disclosure requirements on costs and risks
• Investor protection: improved information standards for private investors

These developments increase transparency and strengthen confidence in the asset class.

Private equity: only for the super-rich?

Investing in private equity is suitable for qualified private investors with expertise in corporate investments. A long investment horizon, awareness of the entrepreneurial risk, and the certainty of not depending on the invested capital during the term are essential.

The financing amount for a direct commitment to an institutional private equity fund in Switzerland is often at least 250,000 CHF or a multiple thereof. For this reason, these funds are primarily suitable for:

• High-net-worth private clients
• Institutional investors
• Family Offices

You gain access to such funds through an institutional provider that distributes the corresponding vehicles. It is crucial to examine the fund’s investment focus in terms of sectors and strategy carefully in advance.

For the classic private investor, however, this does not mean that private equity remains out of reach. Smaller amounts can be invested through closed-end retail funds or public funds, customarily from around 10,000 Swiss francs. These are often funds of funds, which invest the collected money in other private equity funds. Before investing in such vehicles, consider:

• The dual fund structure increases the lack of transparency of the invested funds.
• Double costs arise, as the fund of funds also charges its own fees and management costs.

Access routes for Swiss private investors

For a long time, private equity investments were reserved for institutional investors. Today there are several access routes:

• ETFs on private equity: exchange-traded funds enable investments from just a few hundred francs. They invest in listed private equity firms and offer daily tradability.
• Semi-liquid funds: evergreen and ELTIF structures lower the minimum amounts and offer limited redemption options under certain conditions.
• Closed-end retail and funds of funds: access to classic private equity strategies from around 10,000 francs, with a long capital commitment.
• Private Markets at Everon: through our own, BILANZ-awarded private markets team, we provide access to private markets with lower entry barriers, from CHF 10,000 in private markets.

How do private equity funds differ?

In their investment decisions, private equity funds set strict criteria. A distinction is made between:

• Company phase
• Sector
• Financing amount
• Region

This ensures that the invested assets of a fund pursue homogeneous objectives.

Company phase

Funds that focus on venture capital support young companies in an early, high-risk phase. Here the risk of total failure is greatest until the company with a promising business model reaches market maturity. Companies wishing to spin off or expand a business unit seek growth capital. In the case of an MBO, private equity supports the management’s new strategy for a succession or business transformation.

Sector

When it comes to sectors, private equity funds specifically select segments with future growth, for example new trends based on innovative technology or investments in sustainable technology and products with added ecological value.

Financing amount

When it comes to the financing amount, the focus is on the funds required and the size of the target company. The volume often also influences the minimum investment amount.

Region

With a view to the region, private equity focuses on future growth markets. These do not have to be in Switzerland or Europe; in many Asian countries in particular, economic growth is high.

Reading tip: Private debt: alternative corporate financing and exciting asset class

Private equity: tips for the first investment

Before you consider investing in private equity funds for the first time, it is worth drawing up a checklist in peace. These questions are helpful:

• Can you do without the invested money for a period of at least 10 years?
• Are you willing to take a risk that, in the worst case, could mean a total loss?
• Can you correctly assess the risks of the planned investment?
• Have you selected the right investment company or fund?
• Is the private equity fund’s strategy transparent and comprehensible to you?
• Are you aware of all the fees and costs for the investment?
• Are you willing to forego distributions during the term and only receive the capital at the end of the investment?
• Are you prepared to take on additional risks (transparency and exchange rate risks) for a fund investment abroad?

It is crucial that you answer these questions with a clear yes. If doubts arise, you should not ignore the risks, because in the end you bear sole responsibility for the investment.

Conclusion on private equity

Private equity means off-market investment capital for investments in companies. A private equity fund collects investment money for this purpose and invests it in unlisted target companies. The most common investor groups include high-net-worth private clients, family offices, and institutional investors. For smaller investors, closed-end retail funds, semi-liquid structures, and ETFs offer an entry point. The key point remains: investing in private equity carries a high risk and ties up capital for many years.

In the case of private equity funds, a rough distinction is made between venture capital and buy-out funds. Venture capital mostly flows into young companies with a promising business model, while buy-out funds focus on expansion strategies of mature companies or transactions triggered by management. Investors should define their approach precisely in advance and know all the opportunities and risks using a checklist.

Read on in our journal:

• All about the Swiss vested benefits act
• More about Private Banking
• 3-pillar principle for pension provision
• Types of asset management mandates

Frequently asked questions about private equity

What is private equity in simple terms?

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

How can private investors invest in private equity?

Swiss private investors now have several access routes: exchange-traded funds (ETFs) tracking listed private equity firms from just a few hundred francs, semi-liquid evergreen and ELTIF funds with lower minimums, and classic closed-end funds for qualified investors. Direct institutional funds often require minimum subscriptions from 250,000 francs.

What is the minimum investment for private equity?

Classic institutional private equity funds in Switzerland often require a minimum subscription of 250,000 francs or a multiple thereof. Closed-end retail funds and funds of funds frequently start at around 10,000 francs. Exchange-traded private equity ETFs are accessible from just a few hundred francs.

What are the risks of private equity?

The main risks are a lack of liquidity over many years, limited transparency, high fees and valuation uncertainty. In extreme cases, a total loss of the invested capital is possible. Anyone investing should not depend on the committed capital for the entire term.

How long is capital tied up in private equity?

Classic private equity funds typically have a term of around ten years. During this time the capital is illiquid and cannot be sold like a listed share. Semi-liquid structures such as evergreen funds offer limited redemption options under certain conditions.