In the past 10 years, and particularly in Europe and North America, there has been a substantial growth of funds being invested in private equity.
Such investments, in firms that are not publicly quoted, are no longer on the margins of charities' investment and asset allocation strategies.
The potential for substantial returns has encouraged a flood of money in this direction.
Any charity considering investing in private equity, however, will need to answer some questions. The first is whether private equity is an appropriate asset class to invest in. If it is to diversify a charity's overall investments, it might have a role to play - as an asset class, private equity is not positively correlated with equity markets in which many charities invest.
However, the degree of negative correlation might not be as great as many within the industry would have us believe, so some caution is warranted.
If, however, the reason to invest in private equity is an expectation of exceptional returns, considerable caution is advised. Remember that, in this sector, 10 per cent of all funds produce nearly 70 per cent of positive returns - selecting the right fund manager is of crucial importance.
The second question a charity needs to ask is what it's approach to liquidity is. When investing in private equity funds, charities are tying up their money in an asset class that is illiquid in the short term. An investment profile is typically anything between four and seven years. In a bear equity market, where the opportunity for private equity funds to exit from investments through flotation is limited, illiquidity becomes even greater.
The next question is whether charities should invest directly or through a fund of funds. Investing in private equity through a fund of funds is costly - charges are between 1.5 per cent and 3 per cent on top of the charges of the underlying funds.
But for many medium-sized charities, this is the only realistic way to invest in this asset class. A good fund-of-funds management team will have a significant resource of dedicated analysts monitoring the funds in which they invest.
So is investing in private equity worth the effort?
It depends on where the charity is in relation to the above questions.
It does involve some work, but little more than one would undertake in selecting fund managers to invest an overall portfolio.
The same maxims operate for both. The importance of a fund manager's track record, their stock selection methodology and considerations of risk, returns and diversification are just as applicable to selecting a general fund manager as they are to choosing a private equity fund-of-funds manager.
The private equity market is rapidly maturing and becoming increasingly important globally as a source of funds for mergers and acquisitions and management buyouts.
Can charities really afford to ignore this growing asset class in a global environment of low inflation and low interest rates?