Diversification can be hard
Since private equity fund investments are concentrated in nature, a fund usually has only 10 to 20 companies. This means that if a single company fails it will have a huge impact on the overall returns. Another reason why it is difficult to diversify across multiple funds is due to the high minimum investment amounts.
However, if diversification is your goal, you can choose to pay additional fees and use a fund-of-funds vehicle to buy into private equity. This will provide you access to numerous private equity manager funds within a single vehicle.
