Saving for retirement and how private equity can play a part in your plan

Written by Snowball Effect · Published on Mon, 6 December 2021

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Do you have a retirement savings plan? Whether you’re just a few years away from clocking off your 9-5 for the last time and enjoying the good life, or aren’t looking to retire for a few decades, it’s not too late to start or make changes to your current retirement plan.

There are a variety of options available to help you save for retirement. These range from work-based saving schemes such as KiwiSaver to Term Deposits with your bank, shares, bonds and material assets such as property.

When investing, experts recommend diversifying your investment portfolio and avoid having all your savings in one company, asset class, or industry. This will spread your risk and helps ensure that investment ups and downs are smoothed out and helps protect against financial loss.

How can private equity investing play a part in your retirement plan?

Private equity investing involves investing in private companies that are not publicly listed on the share market. The benefit of private equity is that investors have the opportunity to invest in private, growth-stage businesses, with the potential to earn high returns. These companies can be on a trajectory to eventually list publicly, or be acquired.

What are the benefits of private equity investing?

There are several benefits to adding private equity investments to your retirement saving portfolio. These can include:

  • Potential high levels of return: Private equity opportunities have the potential to generate higher returns than other investment options.

  • Diversifying your portfolio: It complements traditional saving options such as property, publicly traded shares, or KiwiSaver, by providing the investor with the opportunity to invest in private, growth-stage companies across a range of industries.

  • Be part of a company’s growth: As well as financial benefits, private equity investing also enables investors to play an essential role in the business’ growth journey. If you have the right experience, some investments may also provide opportunities to take on an advisory role for the company.

Are there any risks when investing in private equity?

However, when considering private equity investments, it is important to be aware of the level of risk that is associated with this type of investment. These risks include:

  • Liquidity risk: The level of ease for investors to buy and sell their shares. Typically private equity investments are for 5+ years to allow for company growth.

  • Market risk: Investing in growth-stage businesses carries a medium to a high level of risk as there is no guarantee that the company will be able to deliver on its forecast performance.

It’s important to do your due diligence before making a private equity investment to ensure that you are comfortable with the level of risk associated with this type of investment. As well as reading the investment material available and consulting your financial advisor (if appropriate), some other questions to consider and ask before investing are:

  • Does the business have a strong management team in place to help guide its growth?

  • Does the company have robust financial projections?

  • Does the company have a unique product or service offering, or are there multiple competitors in the market?

We’ve curated a series of other questions that you may want to ask before investing here.

Start building your private equity portfolio

At Snowball Effect, we offer investors a range of different private equity investment opportunities across a range of industries. Check out our current investment opportunities here.

If you have any questions about investing in private equity, please don’t hesitate to contact our team to learn more. Contact us at [email protected].