SVG Capital is a private equity firm, based in the UK.
Whilst the average person on the street would be hard pushed to define the concept of private equity, much less name even one private equity firm, PE plays a pivotal and increasingly pivotal role in the wider economy. The investments of PE vehicles have made the creation and continuation of some of the world’s most widely recognised brands possible.
Shares in a private equity firm such as SVG Capital may well be supremely attractive to investors and traders. Private-equity activity is not easily accessible to the average investor – in fact, it is a sphere generally off-limits to everyone bar individuals with considerably high net worth. Firms can require direct investors to contribute millions upfront – and minimum rates generally hover around the £100,000 – £200,000 mark. However, by buying shares in these companies, investors can theoretically reap the substantial rewards they create.
Whilst predominantly unseen and unheard, the explosion of the tech sector in the 21st century has expanded the role and importance of PE. Many modern tech giants owe their existence to PE funding; tomorrow’s big hitters in the sector will have been overwhelmingly reliant on PE capital to get off the ground. This development too has stimulated major investor interest in private equity goliaths such as SVG; market logic dictates that as the tech industry increases in size and profitability, so will the revenues of the PE sphere.
However, investors craving a slice of the PE pie should pause before throwing their own capital into SVG Capital shares. Caution is advised not because of the firm itself, but the industry overall.
Private equity is an industry driven by risk. PE firms specifically exist to finance potentially high-risk ventures that offer potentially significant growth possibilities, which typical lending institutions won’t touch. The more perilous a prospect, the higher rates of return a PE firm can demand. This dynamic insulates the firms from excessive hazards to a certain extent, but the potential for a damaging miscalculation or catastrophic funding error exists. Whilst the post-millennium surge in the tech sector has produced some stunning successes, it has also created some embarrassing flops – and the experience of the latter has meant that PE firms have.
Luckily, the SVG Capital portfolio is varied, incorporating fashion, agrochemicals, hardware, food and drink, finance and software businesses, and more. Diverse portfolios are always to be favored over singularly dedicated portfolios, as diversity can serve to insulate against risk. However, it is always misguided to misconstrue miscellany as diversity – and the SVG Capital portfolio, as of year-end 2014, arguably has more than an entirely reasonable share of risky prospects. Fashion, food and drink and software can all be fairly high-risk holdings – so, in this instance, the variety of SVG’s portfolio may be no guarantee of stability or padding against blunders. Some, however, may find the allure of tapping into the vast profits of the firm too tempting to resist.
Spread betting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.
This report does not constitute a personal recommendation and does not take into account your personal circumstances or appetite for risk