In this interview, we discuss how Private Equity has been made accessible to private clients as a stable and performance-oriented asset class. Key themes include the original motivation, proven strategies such as buyouts and secondaries, the decisive role of manager selection, the prerequisites investors should bring to the table – and why clear structures matter more than the illusion of liquidity.

Interview

1. Private Equity has been part of Schelhammer Capital’s offering since 2003. Why did Schelhammer Capital – formerly Capitalbank – expand beyond equities and bonds at that time? What was the original motivation, and which elements have proven most resilient in times of stress?

As early as 2003 – when Private Equity was still met with widespread skepticism – we asked ourselves why major U.S. endowments such as Yale and Harvard consistently achieved outstanding returns. We quickly discovered that Private Equity played a significant role then and continues to do so today.

As is often the case, investors’ desire for portfolio stability and long-term performance was a key driver.

Within the bank’s Family Office, we recognized early on that Private Equity has a decisive impact on the risk-return profile of a portfolio made up of equities and bonds. It stabilizes performance while enhancing returns over the long term.

Our goal was clear: Austrian private clients and foundations should also be able to benefit.

From the very beginning – and still today – our guiding principle has been to provide access to Private Equity under the highest quality standards. This made Capitalbank a pioneer in Austria. Today, other providers have followed suit, though often without the long-standing expertise that this asset class requires.

At GBG Private Markets, portfolios typically consist of Private Equity funds investing in 10 to 15 companies. In our Private Equity competence center, we pay particular attention to the selection of management teams.

Our investment focus:

• established markets, and

• profitable buyout companies.

By contrast, we avoid direct investments in individual firms, as they run counter to our principle of diversification. The probability of total loss is higher – we simply do not put all our eggs in one basket.

Even after more than 20 years, our clients continue to see the positive effects in their portfolios. Private Equity has evolved from a niche into a sought-after investment universe, with steadily rising demand.

Our focus – then and now – remains on international managers with a strong emphasis on buyouts and secondaries. Historically, the risk-return profile of these segments has delivered the consistent outperformance that our clients expect.

To date, approximately EUR 550 million has been actively invested in Private Equity products. In funds already realized or currently in realization, buyout funds achieved an internal rate of return (IRR) of 16.0% p.a. with a multiple of 1.8x. In the secondary market, returns reached an IRR of 15.6% p.a. with a TVPI multiple of 2.0x.

By focusing on the lower mid-market, investors gain access to a diversified mix of medium-sized companies – large enough for stability, yet small enough for significant value creation through operational improvements and buy-and-build strategies.

2. Before private clients invest in Private Equity: What time horizon, liquidity, and diversification should they realistically expect?

To be very clear: Private Equity is not suitable for every investor. What is required is a long-term investment horizon and the willingness to commit capital for several years. An entrepreneurial mindset is also highly advantageous.

Most funds are closed-end vehicles with a lifespan of around ten years. This means that capital remains tied up and is not readily available in the short term. However, this very structure allows managers to develop companies with patience and discipline, free from the pressure to sell – generating strong performance for investors.

Diversification is equally critical. Well-managed funds typically invest in 10 to 15 companies. This significantly reduces the risk of individual defaults, as weaker investments can be offset by stronger ones. In our experience, however, it is just as important to diversify across regions and industries and not concentrate with a single manager.

In summary: Private Equity investors must accept illiquidity, think in decades, and diversify carefully. Those who meet these criteria can use Private Equity as a complement to equity and bond portfolios – enhancing stability and boosting long-term returns.

3. Why does your Private Equity approach depend so heavily on selecting the right managers?

History is clear: Private Equity has outperformed public equity markets over the long term. But outperformance is not automatic – it depends on manager quality. Just as not all cars are created equal, not all Private Equity managers are alike.

The spread is enormous: top-quartile funds generate double-digit annual returns, while the weakest quartile often struggles to preserve capital. Manager selection is therefore the critical factor in determining whether capital truly grows or remains merely locked up.

Thorough due diligence is indispensable: strategy, consistency, team stability, track record, and operational approach all need to be examined closely. Only then can we ensure that capital is entrusted to managers with a proven ability to create value.

4. What strategy are you pursuing, and why?

Schelhammer Capital’s clients expect consistent outperformance relative to public equity markets – and Private Equity has proven its ability to deliver this for over two decades.

We currently rely on two pillars: buyouts and secondaries.

• Buyouts focus on established, profitable companies. We deliberately target the small- and lower-mid-cap segment, where managers can create added value through governance, margin expansion, and buy-and-build strategies.

• Secondaries allow investment in existing fund portfolios. This flattens the J-curve, shortens investment periods, and accelerates distributions – particularly valuable in uncertain markets.

The critical factors are:

• selecting the best managers, and

• ensuring broad diversification across managers, industries, and vintages.

Together, buyouts and secondaries form a robust Private Equity component that delivers the consistency and outperformance our clients expect.

5. What trends are you seeing in the Private Equity market for private investors?

One current trend attempts to wrap illiquid Private Equity investments in seemingly liquid structures. We see risks here – either returns suffer, or new problems emerge.

A familiar example in recent years: open-ended real estate funds in Germany, which must hold up to 50% liquidity. This liquidity generates no return and thus halves overall performance. Without sufficient liquidity, forced sales or frozen funds become the risk.

That is why we consciously avoid such “liquid wrappers.” Private Equity is designed to function through closed-end structures with terms of around ten years. Illiquidity is not a flaw, but an integral feature – it is the price investors pay for long-term outperformance.

For private clients, transparency about this mechanism is more valuable than the illusion of liquidity. We therefore rely on clear structures that preserve the economic essence of the asset class.

If you would like to learn more about Private Equity, you will find extensive information on the Schelhammer Capital website.