[Video] What Is Private Equity Investing? An Introduction

Finance | Provided by Katie Robinette

Offering the 30,000 foot view of private equity investing, Katie Robinette and Mark Wilkerson of Cornerstone Advisors explore the what, why and how of this unique class of investing. This segment sets the stage for the rest of the series in which Katie and Mark look back to 1980 and explore the four market cycles that shaped the landscape of private equity investing.

Hello and welcome to our private equity primer where we’ll be walking you through the What, Why and How of private equity. I’m Katie Robinette, and I’m Mark Wilkerson, and throughout this video series we will discussing the private equity landscape and how it has evolved over time, why we think it’s an attractive investment opportunity today, and how to get the best results as an investor in the asset class.

What are we talking about when we say private equity.  Confusing Term because it is used to describe very different types of investment strategies such as the leveraged buyout, venture capital and distressed debt investing.

But, there is a common thread across private equity and that is the Limited Partnership structure. The Limited Partnerships structure is how investors access Private Equity. Investors = LPs, PE Manager = GP, Together commit capital to a Fund. GP has 5 years to pick investments and another 5 years to sell them hopefully at a profit. The LP structure has been around for around 30 years and is what made Private Equity an investable asset class.

In subsequent videos we will describe various types of private equity investments but today we’ll start with the concept of the leveraged buyout – a strategy that accounts for a vast majority of the dollars dedicated to the asset class.

If you buy a house for $1 million using all cash and you sell it for $2 million, you make 2x your investment.

If you buy a house for $1 million using 20% cash and borrow the rest, and then you sell it for $2 million, you make about 6x your investment after you pay back your loan. Of course you have to consider the interest costs and that will depend on several factors – but you get the point… the return on your investment is magnified when you use debt to finance your purchase.  And that is the concept behind a leveraged buyout of a company.

In the next episode we will discuss the events that shaped the rise of the leveraged buyout in the 1980’s.

What Is Private Equity Investing: A Five-Part Video Series From Cornerstone Advisors

Living and working in the Pacific Northwest, ‘investing in private equity’ is an oft heard phrase. But what exactly is meant by private equity and how does this investment differ from other investments? How can an investor access private equity investments and does private equity have a place in the traditional portfolio?

In this easy-to-understand five-part series, Katie Robinette and Mark Wilkerson of Cornerstone Advisors introduce you to the world of private equity investing. They’ll explain private equity investing, discuss the structure of these investments and also the different types of returns generated. The series goes on to explore the four market cycles that have occurred since 1980 and what each one means to today’s investor interested in private equity.

Check out the other videos in this series: