A collective investment structure used to make an investment in a number of equities and to some extent debt is known as private equity funds. These types of funds are generally limited partnerships for a term of ten years. At the commencement, institutional investors undertake to make an unfunded pledge to the partnership of a limited company, which is then careworn over the entire term of the private equity fund. Like mutual funds, even a private equity fund is also raised and managed by a bunch of investment professionals who are employed by a private equity fund management firm. Ideally a single firm manages a series of different private equity funds and as part of their work will also attempt to raise new equity funds every three to five years. Most such funds are structured as LPs and thus are governed by the terms put forward in the LPA or Limited partnership agreement. If you’re looking for additional info on golden visa funds explore the above site.
These types of funds have a GP or a general partner, who are responsible to raise capital from the well-off institutional investors, such as high net worth individuals, endowments, foundations, insurance companies, universities and pension plans. These individual investors invest in the fund as LPs or Limited partners. The terms which are put forward pertaining to the governance of such funds are myriad. Here in this article a few of them are discussed in broad-terms. Duration of the partnership, the term of the partnership is ideally a fixed-life investment which ranges typically for ten years with a provision of some limited number of extensions. Management fee, the investors make an annual payment to the tune of the total committed capital towards the fund as part of the professional fees for the manager of the fund. Preferred return or hurdle rate, this is the targeted minimum rate of return which must be attained before the managers can receive their payment under the head of carried interest.
Change of hand/title, private equity funds are not projected to be traded or transferred; however they are free to be transferred to other investors. Restraints for general partners, the manager of the fund has influential discretion to undertake any investment decisions and thus control the entire affair of the fund. However the limited partnership agreement does have some controls and restrictions and is limited to the size, type or the geographic focus of permitted investment. There is also a restriction on the duration for which a manager is allowed to make new investments. If you think that private equity financiers are merely sources of risk capital, you’re way off base. You can be sure that they will take an active interest in your business, especially since there’s a few million dollars involved. However, that’s not always a bad thing. Partners of private equity firms usually bring a wealth of experience, and could add value in terms of building long term strategy, forging alliances or bringing new customers.