A diversified programme of investment in private equity, either through funds-of-funds or direct investments, should reduce the risk of capital loss to less than 1%, according to new research.

The higher returns usually associated with the asset class have traditionally been thought to entail a higher exposure to risk. However, an analysis of the results of 996 investment programmes in the US from 1978 to 1998 by Berenberg Finanzanlagen, the fund management subsidiary of Hamburg-based private bank Berenberg Bank, showed otherwise.