PE tb

The Basics of Private Equity Funding and Management

If you are investing into a private equity fund it is important to understand the machinations behind what various parties do in regards to your private equity investment. When you contribute money into a private equity fund you are effectively transferring your money over to a private equity fund management who will invest your money in accordance with the stipulations of the agreement you entered. Generally speaking, this agreement is called a private placement memo (PPM), although for private equity funds that are not required to be registered with the SEC (typically due to having less than five hundred partners) may have other agreements under varying names that investors can subscribe to.

A PPM will detail out what types of investments the private equity fund manager is allowed to make and any limitations on their investments. A PPM will also detail any management fees that will be paid to the fund manager in exchange for handling your investments for you. Often, these management fees are calculated as a percentage of the fund assets that they are managing. Since management fees can vary widely from one fund to another an individual who is investing in a private equity fund should read the PPM closely. The amount of management fees being charged are required to be disclosed to investors under federal and many state laws. 

 

Private equity study

A PPM will detail out the risks that are typically associated with these types of investments and will provide some standard disclosures regarding the plans for distributing money to you and any limitations on this investment. The investment strategy will be disclosed in some form, even if there is a trade secret is involved in the running of the fund. Often, these investment strategies disclose the types of industries that the Fund will concentrate on investing in.

Around the Web: Financial Case Study – China Sonangol PE Management

Fund managers are generally called either passive or active fund managers. Passive fund managers trade infrequently while active fund managers are frequent traders similar to the way in which day traders operate. Basically, active fund managers will buy and sell different positions frequently. This additional activity may lead to higher management fees associated with these funds.

Private equity managers can vary considerably in both quality and integrity so it is important to perform your due diligence before investing in a fund. Consider the reputation of the manager amongst his peers as well as their track record in providing returns for investors.

The Process of Private Equity

When trying to understand the process of private equity, knowing what can yield you the best return on investment should be a top priority. Reading over the current news on the subject can give you a truly clear perspective on what is going on in the market. With the right information at hand, you can create more informed decisions, and end up with a higher profit margin for any businesses you own. The more that you decide to research, the more you gain in anything that you do. Valuable resources also exist both in books and online to give you the real knowledge you need to make the right investments. Using these methods of learning can enable you to really know, in depth, the process of how the mergers and exchanges of large transactions take place, along with the way they can help you achieve your goals.

If you look at the state of the market today, you will likely notice how diluted it can be at times. The stock exchange in most countries can give you are broad view of where it may go though. If you pay close attention, you will likely gain rewards that most people never end up achieving. This is the key to a person’s real success, knowing how to properly utilize the resources available to you. Doing this now before you make any critical decisions can help pave the road to the success you want, so in the end you ultimately gain value out of your investments. News stories on acquisition and mergers come and go, but if you learn where the real secrets lie such as in detailed reports and statistics, you can end up reaping the benefits that others end up missing out on and truly come out ahead over the competition.

Obtain further investment insights from Crescent Point David Hand and Crescent Point Private Equity, the leading emerging markets investment management and financial advisory firm primarily focused on the Asia-Pacific and Middle East regions.