The Ordinary Investor and Private Equity

Since the financial crisis of 2007–08, a tougher fundraising climate has led the private-equity industry to seek out “ordinary” investors, who can now access private equity through the publicly listed shares of private-equity firms.

As private equity broadens its investor base, a question arises: How do the investment opportunities offered to the “little guy” compare with those of sophisticated investors?

Since 2007, ordinary investors have been able to buy shares in Blackstone, Apollo, KKR and Carlyle, all formerly large buyout firms. Since going public, the firms have grown assets under management by purchasing fee-generating assets outside of their origins in private equity to become “asset managers.” Thus, their performance as public firms is less based on the private-equity investments that ordinary investors might have thought they were gaining access to by purchasing shares.

To access private equity, it’s better to be a sophisticated investor. The ordinary investor still might wish to seek and earn his or her fortune to become a high-net-worth individual who can meet the minimum investment required.

Read more about private equity and the ordinary investor in Darden Professor Susan Chaplinsky’s article “Can the ‘Little Guy’ Get a Break in Private-Equity Investments?” in the Darden School of Business/Washington Post “Case in Point” series.

About the Faculty

Susan Chaplinsky

Chaplinsky’s expertise is in corporate finance, private equity, capital raising, investment banking and valuation. Her research is widely cited and addresses the availability and costs of different forms of capital. One of her research specialties is PIPEs (private investments in public equities) — a method by which companies raise capital... Learn More