How to invest in private equity
Private equity (PE) has emerged as an important asset class for private investors seeking enhanced potential returns and portfolio diversification beyond traditional public markets. Yet for many investors, understanding how to invest in private equity remains unclear. This comprehensive guide explores the various ways to invest in PE, the investment process, and how Connection Capital provides its professional clients with direct access to PE investment opportunities in the UK.
Why do people invest in private equity?
PE offers ownership in unlisted companies at critical growth inflection points, enabling longer-term value creation than public markets allow. UK PE has delivered median 12% annual returns over 20 years1, outperforming public indices whilst providing genuine diversification through low correlation with public markets and access to dynamic privately held businesses unavailable publicly. To explore why investors choose private equity in greater detail, read our guide on this topic.
What are the ways to access private equity?
Investors have several routes to gain access to different types of PE, each with distinct characteristics, requirements, and suitability for different investor profiles.
Private equity funds
Traditional PE funds represent the most common investment vehicle. These funds pool capital from multiple investors to acquire stakes in a portfolio of companies. Fund managers charge a management fee and a performance fee (known as carried interest or carry) on returns above a specified threshold.
Co-investments and direct investments
Co-investments let investors join lead PE firms in specific deals, typically offering lower fees and greater control. Direct investments bypass fund structures entirely, providing maximum autonomy but requiring substantial expertise and deal flow access. Both demand investor experience and meaningful capital commitments.
Funds of funds
Fund-of-funds invest across multiple PE funds, delivering instant diversification across managers, strategies, and geographies. This solves access and selection challenges but adds fee layers that can impact returns. They suit investors seeking broad exposure without resources to build diversified portfolios directly.
| Access route | Minimum investment | Liquidity | Fees | Best suited for |
| Traditional PE funds | £1m–£10m | Very low (5–10 years) | 2% management + 20% carry | Institutional investors, family offices |
| Co-investments | £250k–£5m | Very low (5–7 years) | Reduced or no carry | Investors with deal evaluation capability |
| Direct investments | Varies wildly | Very low (5–7 years) | None (but requires internal resources) | Experienced investors with dedicated teams |
| Fund-of-funds | £250k–£2m | Very low (5–7 years) | Dual layer fees | Investors seeking diversification without direct fund access |
| Listed PE trusts | No minimum | High (daily trading) | Management fees + underlying costs | Investors seeking PE exposure with liquidity |
| Connection Capital model | £25k–£250k per deal | Low (3–7 years) | Deal-specific, transparent | HNW professional investors seeking direct UK SME access |
What to look for when deciding to invest in private equity
When evaluating PE opportunities, scrutinise management team experience, track record, and operational expertise. Examine fee structures, understanding how costs impact net returns. Assess investment strategy, target sectors, and realistic exit pathways.
Review historical performance across market cycles, not just recent years. Ensure the time horizon matches your liquidity needs and the strategy suits your risk tolerance and portfolio objectives.
Can individual investors access private equity?
Historically, the minimum ticket size to invest in a PE fund was typically at least £1m with higher minimums for larger funds. Companies like Connection Capital have enabled entry into PE funds and direct PE investments from just £25,000. Our professional investors include high-net-worth individuals, family offices, and experienced private investors—often successful entrepreneurs and business professionals with understanding of SME dynamics. Investors typically build diversified portfolios across multiple opportunities, sectors, and vintage years, recognising that volatility management benefits from this approach.
Direct vs indirect investing in private companies: which route may be suitable for an investor
Investors can access PE through direct company investments or indirect fund structures. Direct investing offers greater control and typically lower fees but demands substantial expertise and deal flow. Indirect routes provide diversification and professional management at the cost of additional fees. The optimal approach depends on capital availability, experience, and investment objectives.
As well as offering professional investors access to PE funds operated by third party managers, Connection Capital provides professional investors direct access to UK SME PE opportunities too. We originate and present standalone transactions enabling bespoke portfolio construction with full transparency.
What are the risks in investing in private equity?
PE investments carry significant risks including illiquidity (investments should be considered as long-term holds); potential concentration risk requiring careful diversification; performance variability between managers and vintages; and potential total loss of capital. Company performance can fluctuate substantially, and unlike public markets, investors cannot exit positions quickly when circumstances change. Therefore, Investors should bear in mind that there are no guarantees of returns, they may not be protected if something goes wrong and they should not invest unless they are prepared to lose all of their money.
- UK Private Capital, Industry performance: UK private capital returns, UK Private Capital (2024)