Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

"Growth Capital" vs "Private Equity" AIC sectors

Closed-end funds and OEICs
mc2fool
Lemon Half
Posts: 7812
Joined: November 4th, 2016, 11:24 am
Has thanked: 7 times
Been thanked: 3017 times

"Growth Capital" vs "Private Equity" AIC sectors

#448030

Postby mc2fool » October 5th, 2021, 1:53 pm

@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.

The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".

Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that? :?

DavidM13
Lemon Slice
Posts: 423
Joined: October 12th, 2018, 5:01 pm
Has thanked: 46 times
Been thanked: 405 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448036

Postby DavidM13 » October 5th, 2021, 2:15 pm

mc2fool wrote:@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.

The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".

Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that? :?


I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)

mc2fool
Lemon Half
Posts: 7812
Joined: November 4th, 2016, 11:24 am
Has thanked: 7 times
Been thanked: 3017 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448038

Postby mc2fool » October 5th, 2021, 2:19 pm

DavidM13 wrote:
mc2fool wrote:@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.

The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".

Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that? :?

I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)

Ummm, ok, well then maybe a better description that lets users see what the distinction is between the two "Invests in unquoted shares" sectors (whatever that is!) ... ;)

UncleEbenezer
The full Lemon
Posts: 10690
Joined: November 4th, 2016, 8:17 pm
Has thanked: 1459 times
Been thanked: 2965 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448164

Postby UncleEbenezer » October 5th, 2021, 8:39 pm

mc2fool wrote:Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that? :?

No. Private Equity often (mostly?) takes non-controlling stakes.

I think Private Equity is a broad umbrella, ranging from asset-strippers who are the classic media villains, through specialists such as rescue/turnaround experts, to Venture Capital supporting growth of up-and-coming companies. I'm not familiar with the Growth Capital label, but I'd suspect it sits somewhere within PE, perhaps close to VC but without the special rules and tax incentives.

mc2fool
Lemon Half
Posts: 7812
Joined: November 4th, 2016, 11:24 am
Has thanked: 7 times
Been thanked: 3017 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448265

Postby mc2fool » October 6th, 2021, 12:19 pm

DavidM13 wrote:I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)

So what's the answer then? What is the difference between the AIC "Growth Capital" and "Private Equity" sectors? And what is the full description of them?

You (the AIC, not you personally :)) must have a definition, at least one that defines which ITs go into which sector.

I can find all sorts of definitions of the two online, but I think you have to agree that the AIC definitions (at least, according to the glossary) are rather vague and ambiguous. :? :D

DavidM13
Lemon Slice
Posts: 423
Joined: October 12th, 2018, 5:01 pm
Has thanked: 46 times
Been thanked: 405 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448292

Postby DavidM13 » October 6th, 2021, 1:40 pm

Growth capital also referred to as expansion capital is a sub sector of the entire unquoted equity universe. It is when a private equity firm makes a non-control, equity investment in a company. Cash is received by the company and not the selling shareholders in order to provide expansion capital for the investee company. Leverage is rarely employed on the investee company to finance the purchase price.

There are a number of sub-sectors within the unquoted investments universe and it wouldn't be possible to have an AIC sector for each but this area was identified as one with a meaningful size in order to create this new sub-sector of Private Equity named, Growth Capital.

mc2fool
Lemon Half
Posts: 7812
Joined: November 4th, 2016, 11:24 am
Has thanked: 7 times
Been thanked: 3017 times

Re: "Growth Capital" vs "Private Equity" AIC sectors

#448299

Postby mc2fool » October 6th, 2021, 2:23 pm

DavidM13 wrote:Growth capital also referred to as expansion capital is a sub sector of the entire unquoted equity universe. It is when a private equity firm makes a non-control, equity investment in a company. Cash is received by the company and not the selling shareholders in order to provide expansion capital for the investee company. Leverage is rarely employed on the investee company to finance the purchase price.

There are a number of sub-sectors within the unquoted investments universe and it wouldn't be possible to have an AIC sector for each but this area was identified as one with a meaningful size in order to create this new sub-sector of Private Equity named, Growth Capital.

Aha! Ok, great, thanks David. :D

Now maybe you might consider changing the glossary descriptions of the two sectors to reflect that? ;) (Or at least a condensed version thereof).


Return to “Investment Trusts and Unit Trusts”

Who is online

Users browsing this forum: No registered users and 12 guests