IN FOCUS6-8 min read

Six key differences between private equity and public market investing

New, smaller investors are entering private markets. We explain some key differences between investing in private versus public equity markets.

private public investing


Rory Bateman
Co-Head of Investment and Head of Equities
Tim Creed
Head of Private Equity Investments, Schroders Capital

We asked Rory Bateman, Schroders’ Co-Head of Investment and Global Head of Equities, and Tim Creed, Head of Private Equity Investments, Schroders Capital, to explain six of the differences between private versus public equity investing.

1. Ownership

RB: “Public equities are companies that are listed on a publicly available stock market and they may be owned by millions of investors that hold a share in the business. These shares can be traded on a daily, or even an intra-day, basis.”

TC: “Privately-held companies are not listed and are generally owned by either individuals/families or private equity funds. The latter buy companies in order to grow them substantially over a number of years and they do so with capital from pension funds, insurance companies, endowments and foundations and also from individual retail investors. The majority of companies in the UK and the world are privately owned.”

2. Information availability

RB: “A public company has to make material information about it publicly available, generally in accordance with acceptable accounting and reporting standards, while there are no such legal obligations for private companies.”

TC: “While information about private companies may not be in the public domain, the business’s general and limited partners* will have access to all information about it. One of the advantages of not having to make all information publicly available is that private companies can focus their time and resources on operating the business as opposed to fulfilling regulatory reporting requirements.”

*General partners (GP) are investment professionals responsible for managing the fund while limited partners (LP) are the external investors that provide the capital for private investments.

3. Investor involvement

RB: “As investors of public companies, you can be as involved as you want to be - you can be a passive shareholder or an active one who seeks to positively influence corporate behaviour on behalf of other investors. At Schroders we take this role very seriously and use our voice as responsible corporate citizens to ensure the businesses we invest in are managed in the most sustainable way.”

TC: “Arguably, you have a greater opportunity to be an active stakeholder as private investor. Generally you’re one of a few, majority shareholders – versus a public market investor who is usually one of many minority shareholders. You can often therefore be closer to the business and can exert a greater influence on the running of the company. Furthermore, when a private equity fund invests, they generally build a business plan jointly with management which includes clearly agreed upon areas of growth.”

4. Valuation methods

TC: “Direct investments in private equity are valued in accordance with generally accepted valuation principles and procedures, typically monthly or quarterly. The valuation methodology will be based on either of the three approaches below, or a combination thereof:

- A market approach based on the value of comparable companies, applying a revenue profit multiple

- An income approach based on the cash generated and profitability of the company

- A ‘milestone’, event driven approach (usually for companies that won’t generate income or cash flows any time soon).

RB: “Listed equities are priced every day in the market, based on supply and demand. You can go onto any public market data provider and find out exactly what the current price of a listed equity is, at any point in time. If lots of investors are selling a stock, the decrease in demand/increase in supply should weigh on the stock price, all else being equal. The opposite should also hold true: where there are lots of buyers of a stock, in the face of fixed supply, its share price should go up.”

5. Liquidity

RB: “Listed equity is considered a relatively liquid investment. This is because you can generally buy and sell stocks quickly, thereby accessing your invested cash at any time.”

TC: “Private equity has become a large market and as the industry has matured there is now an increasingly effective secondary market for private assets which means it’s become easier for investors to find buyers and sellers of private assets, rather than being restricted to transacting through the manager holding their capital.

“There are also different ways to structure a PE investment, for example in a fund that allows for periodic liquidity windows. This affords greater flexibility for those investors that may need to withdraw their funds before the end of the investment’s term.”

6. Ease of access

RB: “Buying public equities is a relatively simply process as there are a range of platforms that enable even the most inexperienced investor to buy and sell shares easily.”

TC: “While it’s harder for your average investor to access private equity compared with public equity, it is becoming easier in some respects thanks to regulation and the emergence of new products. For example, the European Long-Term Investment Fund – or ELTIF - is a type of investment fund that allows sophisticated retail investors to access private asset investments. In general, these types of funds involve fewer capital calls, shorter investment horizons, simpler tax reporting designed for individuals, and lower minimum subscription amounts.

“A capital call is when a fund manager calls on the fund’s investors to provide capital in order to make investments and meet obligations of the fund, such as expenses and fees.”

Private vs public

Important information: The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This article is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results, prices of shares and the income from them may fall as well as rise and investors may not get back the amount originally invested. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Conduct Authority. For your security, communications may be taped or monitored.


Rory Bateman
Co-Head of Investment and Head of Equities
Tim Creed
Head of Private Equity Investments, Schroders Capital


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For illustrative purposes only and does not constitute a recommendation to invest in the above-mentioned security / sector / country.

Schroder Investment Management (Europe) S.A. is subject to the UCITS law of 17 December 2010 and the AIFM law of 12 July 2013.