People wanting to make the most of their money in the long term could do worse than invest in private equity investment trusts, with the industry sector currently worth £9.5 billion.

The Private Equity investment trust sector has been the top performing AIC Member sector over a 10 year period almost month in, month out since 31 July 2001.

The sector as a whole has also beaten the FTSE All-Share over the last 3, 5 and 10 years, up 76%, 83% and 255% respectively.

While the instability and uncertain nature of the stock market has put off some from directly investing in shares, investment trusts have a well-managed spread of risk. Because investors are not reliant on the success of just one company, returns can be made on a diverse and well-managed range of investments.

Low minimum entry levels from £50 per month or a £250 lump sum mean that investments can be kept at a sensible risk level. Shares in Private Equity investment trusts can usually be purchased within an ISA.

Private Equity investment trusts invest in a broad range of unquoted companies, from those at an early stage in their development to the larger management buy-outs, and some investment trusts will focus on different stages of the private equity cycle to others.

While savings in banks and building societies are safe, accessible and guaranteed, the value of savings will remain static as inflation reduces their spending power.

According to The Association of Investment Companies (AIC), Private Equity investment trusts are quoted investment companies whose sector is worth £9.5bn including 3i Group and £3.9bn excluding 3i Group.

Geographically, there is a broad range of choice, with some Private Equity investment trusts focussing on the UK, and others on Pan Europe or internationally.

Private Equity Investment trusts should not be confused with Venture Capital Trusts (VCTs). VCTs launched after April 2006 cannot invest in companies with gross assets of more than £7m immediately before investment and £8m immediately after investment. VCTs launched before April 2006 cannot invest in companies with gross assets of more than £15m immediately before investment and £16m immediately after investment.

VCTs must also have a UK focus. VCTs have significant tax benefits for private investors – 30% up-front income tax relief if the shares are bought at launch and held for a minimum of 5 years.

Some have voiced concerns that the private equity investment trust sector might be overheating, but there are still a vast number of fans who realise the potential returns of their investments.

Andrew Lebus, Managing Partner of Pantheon Ventures, Managers of Pantheon International Participations PLC, said: "In our view, the outlook for superior risk adjusted returns in private equity is strong, especially for those with diversified portfolios. The asset class offers good opportunities for institutions and private investors. Experienced managers will find good investment opportunities without being seduced into paying excessive prices."

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC), said: "The Private Equity investment trust sector is a good illustration of the diversity in the closed ended investment company universe and it has been quietly delivering consistently outstanding returns. But investors should be mindful that alongside the potential for good long-term returns, the sector can be cyclical and it is important to take a long-term view."

"For investors prepared to do their homework, there is a wide variety of choice, from fund of funds through to trusts investing directly into the market, through to internationally focused trusts, pan European or UK only trusts."

The value of investments can fall as well as rise, meaning investors may get back less than they invested. But for those that are willing to spread the risk over a range of companies, and saving for the future, Private Equity investment trusts could be just the right choice.

The article Spreading the risk originally appeared on 999 Today