Both hedge funds and private equity funds appeal to high net worth individuals

Both hedge funds and private equity funds appeal to

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Both hedge funds and private equity funds appeal to high-net-worth individuals (many require minimum investments of $250,000 or more), traditionally are structured as limited partnerships and involve paying the managing partners basic management fees plus a percentage of profits. Private equity fund: Private equity funds more closely resemble venture capital firms in that they invest directly in companies, primarily by purchasing private companies, although they sometimes seek to acquire controlling interest in publicly-traded companies through stock purchases. They frequently use leveraged buyouts to acquire financially distressed companies.
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Unlike hedge funds focused on short-term profits, private equity funds are focused on the long-term potential of the portfolio of companies they hold an interest in or acquire. Once they acquire or control interest in a company, private equity funds look to improve the company through management changes, streamlining operations or expansion, with the eventual goal of selling the company for a profit, either privately or through an initial public offering in a stock market. To achieve their aims, private equity funds usually have, in addition to the fund manager, a group of corporate experts who can be assigned to manage the acquired companies. The very nature of their investments requires their more long-term focus, looking for profits on investments to mature in a few years rather having the short-term quick profit focus of hedge funds. Since hedge funds are focused on primarily liquid assets, investors can usually cash out their investments in the fund at any time. In contrast, the long-term focus of private equity funds usually dictates a requirement that investors commit their funds for a minimum period of time, usually at least three to five years, and often from seven to 10 years. Hedge fund : the aim of a hedge fund is to provide the highest investment returns possible as quickly as possible. To achieve this goal, hedge fund investments are primarily in highly liquid assets, enabling the fund to take profits quickly on one investment and then shift funds into another investment that is more immediately promising. Hedge funds are riskier because of their focus on short term profits. - Structure of hedge fund: similar to limited partnership - Traders, not managers or entrepreneurs - Put pile of money into anything that they think will give them a return - Private equity: very involved, relationship - Background of general partnership: people who have created or run successful businesses, have experience 4. What sorts of portfolio companies do you think might be good candidates for organized private equity? The typical candidate is too risky for arm’s-length debt and is unsuitable for relationship debt because it lacks collateral or a reliable cash flow or because control by a lender would inhibit growth from risk taking. The company is likely not eligible for the public equity market because it is too small and because it lacks a sufficient track record.
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