Private Equity Notes
Private equity
Private equity is a source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. Partners at private equity firms raise funds and manage these monies for the purpose of yielding favorable returns for their shareholder clients, typically with an investment horizon between four and seven years.
These funds can be used in the purchase of shares of private companies, or in public companies that eventually become delisted from public stock exchanges under go-private deals. The minimum amount of capital required for investors can vary depending on the firm and fund raised. Some funds have a $250,000 minimum investment requirement; others can require millions of dollars. Let's delve a little deeper into private equity firms. (Smaller investors have found ways to get closer to the private equity action.
Introduction to Private Equity
Private equity has successfully attracted the best and brightest in corporate America, including top performers from Fortune 500 companies and elite strategy and management consulting firms. Top performers at accounting and law firms can also be recruiting grounds, as accounting and legal skills relate to transaction support work required to complete a deal and translate to advisory work for a portfolio company's management.
The fee structure for private equity firms varies, but it typically consists of a management fee and a performance fee (in some cases, a yearly management fee of 2% of assets managed and 20% of gross profits upon sale of the company). How firms are incentivized can vary considerably.
Given that a private equity firm with $1 billion of assets under management might have no more than two dozen investment professionals, and that 20% of gross profits can generate tens of millions of dollars in fees for the firm, it is easy to see why the private equity industry has attracted top talent. At the middle
Private equity is a source of investment capital from high net worth individuals and institutions for the purpose of investing and acquiring equity ownership in companies. Partners at private equity firms raise funds and manage these monies for the purpose of yielding favorable returns for their shareholder clients, typically with an investment horizon between four and seven years.
These funds can be used in the purchase of shares of private companies, or in public companies that eventually become delisted from public stock exchanges under go-private deals. The minimum amount of capital required for investors can vary depending on the firm and fund raised. Some funds have a $250,000 minimum investment requirement; others can require millions of dollars. Let's delve a little deeper into private equity firms. (Smaller investors have found ways to get closer to the private equity action.
Introduction to Private Equity
Private equity has successfully attracted the best and brightest in corporate America, including top performers from Fortune 500 companies and elite strategy and management consulting firms. Top performers at accounting and law firms can also be recruiting grounds, as accounting and legal skills relate to transaction support work required to complete a deal and translate to advisory work for a portfolio company's management.
The fee structure for private equity firms varies, but it typically consists of a management fee and a performance fee (in some cases, a yearly management fee of 2% of assets managed and 20% of gross profits upon sale of the company). How firms are incentivized can vary considerably.
Given that a private equity firm with $1 billion of assets under management might have no more than two dozen investment professionals, and that 20% of gross profits can generate tens of millions of dollars in fees for the firm, it is easy to see why the private equity industry has attracted top talent. At the middle