Outperform public markets with private equity

There could be many reasons: it could be because private equity managers have successfully identified companies that outperformed the broader market. They also tend to use more leverage than typical companies, which increases their risk — but also returns. And lastly: some private equity companies have shown the ability to improve company profits.

The appropriate amount depends on the riskiness of your overall portfolio. Private equity is a component of your allocation to equities, so it isn’t a source of diversification if you already have a significant portion of your investments in equities. Our team will assess how private equity fits into your broader portfolio and determine how much you can invest based on your overall target portfolio risk.

Private Equity is available to Wealthsimple clients who work with one of our advisors through Wealth Management — a service designed for investors and families with more than $1M in assets.

Equities are one of the riskier asset classes, and private equity is a high risk type of equity investing.

Investors also need to carefully consider the manager — some of whom may perform better (or worse) than the index as a whole. Top quartile funds have earned significantly more than public markets (ranging around 10%, with variance by year), while bottom quartile funds have actually underperformed public markets.

Beyond company and manager risk, private equity investors have limited liquidity, meaning that they can’t sell on the open market the way that they can with a public stock. This may be a source of return, but it also means that they can’t get their money back when they want it. Also, private managers may delay selling companies when they believe that valuations are low, which could align with when investors want to sell.

Specifically for Wealthsimple’s private equity, investors will also be subject to currency risk. However, this is no different than other international ETF investments with us.

Private equity investing is not for everyone. Our team of advisors will get to know you to determine whether you are a good fit for this product.

Private equity carries a different risk profile than public markets. Illiquidity, manager dispersion, and the absence of daily pricing all require a more deliberate approach to risk management and we address this across three areas.

1. Manager selection: Our investment research team conducts rigorous due diligence before allocating to any manager — including in-depth interviews, quantitative benchmarking against relevant peers, operational and governance reviews, and reference checks. Ongoing monitoring ensures managers continue to meet our standards post-allocation.

2. Portfolio diversification: Capital is allocated across multiple high-quality managers with differentiated strategies, sector expertise, and return profiles. This reduces reliance on any single approach and dampens the impact of underperformance at the individual manager level — improving consistency of outcomes over a full market cycle.

3. Position sizing: Even within a well-constructed private equity allocation, concentration risk at the portfolio level matters. We size private equity exposure to what's appropriate for your overall financial picture — ensuring illiquidity is a considered feature of your portfolio, not an accidental one.

The fund predominantly invests in mature businesses across a variety of industries from around the world. The investments are made where the private equity managers believe that they can materially improve the performance of an existing company, often through improvements in operations.

It's best to think of this as a long-term investment. Therefore, we plan to make redemptions available once per quarter (on the last day of the quarter), with 100 days notice required. Clients can collectively withdraw up to 5% of the portfolio value. In that event, if total cash redemption requests exceed 5%, we will allow clients to redeem their units for cash on a pro-rata basis. Redemptions may be suspended in certain circumstances and may vary depending on the liquidity of the Fund’s portfolio. Redemption requests in excess of any cash redemption limit may be satisfied by the issuance of redemption notes, which are non-transferable.

Withdrawals will be subject to a settlement period of up to 100 days after the end of the quarter in which the redemption is requested.

We're also taking a number of steps to make sure you know and can tolerate the illiquidity of this investment, including a cap on the investment size and a suitability check. Even with these steps, you should know that you may not be able to withdraw all of your funds.

On top of Wealthsimple’s standard managed fees for its advisory services, the investment will be subject to other fees based on the underlying managers. The underlying managers typically charge 1.5% management fee and 12.5% to 15% performance fee, provided the investments earn at least 5% return. There are often fees from the managers of private equity funds for secondary interests in funds, which will vary depending on the manager. While these can be meaningful, keep in mind that they are often outweighed by the discount in price. Historically, private equity has outperformed the stock market after fees, making it an attractive option for long-term investors looking to build wealth.

We allocate to three institutional-calibre managers, each selected through rigorous due diligence and continuously monitored by our investment team.

LGT Capital Partners: Founded in 1998 by the Princely Family of Liechtenstein, LGT Capital Partners began by managing their own family wealth. Today, LGT is a world-class alternative investment manager, overseeing more than $110 billion in assets. As principal investors, LGT commits its own capital alongside clients, which means their interests are directly aligned with yours. Over more than two decades, LGT has demonstrated remarkable discipline and delivered attractive returns across its private equity strategies, consistently ranking in the top quartiles versus global peers.

EQT: Founded in 1994 in Sweden, EQT Group has grown into a global leader in private markets, managing over $400 billion in assets across more than 25 countries. The firm’s institutional private equity funds have delivered consistently strong returns across market cycles. Unlike many private equity managers that rely heavily on financial engineering (optimizing a company’s structure through tools like leverage to increase investor returns), EQT focuses on acquiring high-quality businesses with strong underlying growth potential. The firm invests in sectors where it has deep expertise, including technology, healthcare, and industrials, and emphasizes long-term value creation through operational improvement and strategic development.

Accolade Partners: Since its founding in 2000, Accolade Partners has quickly earned a reputation as a top-tier venture and growth equity fund of funds. Many Accolade funds consistently rank among the top quartile, giving investors access to leading VC names like Andreessen Horowitz and Kleiner Perkins. In other words, you’re investing alongside some of the most sought-after innovators in the world. Together, these three managers offer complementary exposure across buyout and growth equity, giving the fund meaningful diversification across strategy, stage, and geography. 

We'll invest in existing private equity fund investments (“secondaries”) and new private equity investments directly in companies (“co-investments”).

Secondary investments are often sold at a discount, tend to have a shorter holding period, and are, by their nature, fully deployed. Historically, secondary investments have achieved superior returns to direct fund investments, often because these investments are sold at a discount to reflect the seller’s need for cash.

Co-investments are direct stakes in companies that are being acquired by a private equity firm. Funds often make purchases that are larger than they want to include in one fund to be sufficiently diversified. To solve this, firms invite major investors to invest additional money. These investments are lower fee and have had similar returns to other private equity investments.

We may also invest in liquid assets to provide liquidity to investors.

Good question.

Our comparison is based on Bloomberg MSCI World Total Return index and Preqin Global Private Equity Benchmark from 2001/01 to 2024/09. The past performance of private equity or any other security or investment strategy is not an indicator of future performance, and past performance may not be repeated. All investments involve risk.

You can find out more about the comparisons here.