Private Equity

What is private equity?

Private equity investment involves purchasing shares in private companies requiring a cash injection in order to launch or expand. Because the investments are typically in young, dynamic enterprises, the returns are unlikely to be stable or predictable.

The skilled investor will, therefore, carefully  weigh up risk against possible returns before making a commitment to buy. As private companies’ performance has little to do with movements in the public equity markets, acquiring private shares is a great way to diversify your portfolio.

Investing in Private Equity

 

There are numerous ways to gain exposure to private equity. One of the most popular and successful in recent years has been the Enterprise Investment Scheme (EIS). The EIS was introduced by the Government to encourage investment in smaller businesses by reducing the risks involved.

The incentives for investors include:

  • 30{a8507fc61e56909c9fcadf1c3789f12a1ae4ba51c084a1e57d9bf0d8a5aab59d} income tax rebate on the amount invested
  • Exemption from Capital Gains Tax on profits
  • Losses offset against income tax
  • Capital gain liabilities deferred and eliminated entirely at death.

As an investor, you can take advantage of these reliefs on anything from £2,000 to £1million of investment made into EIS eligible companies per year.

 

All investing carries a certain level of risk, please do not use this information as instruction to buy or sell, independent financial advice should always be taken before purchasing an investment.