Private Equity

In contrast to real estate, where investors purchase commercial and residential properties, and then sell them to make a profit over some time, private equity invests capital into large businesses. This could result in an increase in the investment limit as the profits of the business are distributed among all investors who have invested in the fund. This is the reason why the industry so profitable for private equity firms which earn a profit from their fund management fee as well as carried interest and the portion of each deal’s return.

As new managers join the market, they are facing an uphill struggle to raise the full amount of funds as LPs are concerned about their performance and have cut their allocations. However an effective fundraising campaign is contingent on planning and preparation. Fundraising is a momentum game and GPs should be able to identify the best routes to reach their goals of committed capital prior to getting on the road. They must also be clear about the sweeteners that they are willing to provide like scale discounts as well as early bird benefits for first-movers.

It doesn’t matter if the fund is an investment vehicle that is new or a buyout fund many PE companies turn to placement agents to help connect with LPs and to promote their funds. These professionals receive an amount based on a agreed amount of money raised by the fund. This is why it is essential for GPs to assess their internal investor relations department’s capabilities before enlisting help of an agent for placement.

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