Private Equity: A Guide to Equity Investment

Private equity is a kind of investment in an asset that can not be traded freely on the stock market. Private equity is of many types, including mezzanine capital, angel investing, leveraged buyouts, venture capital, etc.

Private Equity: How it works

Private equity funds are set up as limited partnerships. These limited partnerships are controlled by private equity firms that are the general partner in limited partnerships. The private equity firm encourages individuals and institutions to invest in private equity fund. Thus, investors become limited partners, even if the general partner controls the management company. When the general partner thinks that a particular investment is feasible, ask the limited partners to invest the amount is guaranteed. The general partner chooses the investment portfolio of the Partnership, while the limited partner provides funds to invest. The limited partner, or investor, in turn profits through the sale, merger, recapitalization or initial public offering.

Categories of Private Equity:

Private equity has many types of investments that fall under, but the most important include growth capital, angel investment, venture capital and leveraged buyout.

Benefits of private equity funds:

1) The funds obtained through the private equity industry are essential for growth and development of innovative products.

2) private equity funds are used for the expansion of working capital.

3) private equity funds are useful when it comes to facilitate mergers and acquisitions.

4) private equity funds to the budget of a company stronger, and help develop it.

5) private equity funds are a great way to get funding for small businesses and start-ups that have not been able to obtain loans or scholarships.

6) The general partner manages the business, so investing partners or limited partners, may not interfere in the management of the company.

Disadvantages of private equity funds:

In addition to the advantages of private equity funds have some drawbacks.

1) Because private equity funds are not open to investments on the stock market, anyone who wants to sell the stocks of a private equity fund has difficulty finding a buyer.

2) There are certain traffic limits private equity.

3) Most people can not afford the massive investment required in a private equity firm.

Private equity funds are a good investment options for venture capital and other organizations looking for long term investments in projects that will bring good returns. However, they are not open for public trading and not accessible to smaller investors and individuals. Forming a private equity fund is a good option for small business owners that have not been able to source funds for their start-up or long-running business from any other source .......