A Glimpse Of Private Equity Funds
Collective investment structure used for investing in several portfolio companies through equity and sometimes debt is known as private equity funds.
Most of these funds are limited partnerships with an average lifespan of ten years. At the start, institutional investors often use an unfunded pledge to the firm to help it raise funds.
Majority of the PE funds are professionally managed by experienced investment specialists working with a private equity fund management company. Sometimes one firm can manage multiple funds as seen with Monument Capital Group Holdings and will try raising new money to ensure its continuance within the industry. A large majority of the funds are limited partnerships and often governed by the limited partnership agreement. The fund has a general partner whose primary responsibility is raising capital from institutional and other investors like high net worth individuals, endowments, insurance companies, and pension funds.
The investors infuse money in the limited partnership and the money is then used for funding businesses that match the investment philosophy of the PE funds; to know more visit http://finance.yahoo.com/news/monument-capital-group-holdings-llc-133400358.html. The average duration of the PE funds is ten years with some provision for an extension. The investors provide a fixed management fee of about one or two percent of the committed capital to the managers. The preferred rate also known as hurdle rate is the minimum rate of return that must be earned before the fund managers can earn their professional fees. Private equity funds cannot be traded but the portfolio companies can be divested to other buyers to earn capital gains. The investments are governed by the decisions made by the investment committee and potential companies are evaluated on various factors, such as revenues, free cash flows, and other related considerations.
Firms like Monument Capital Group Holdings LLC invest only in certain sectors while other PE funds are sector agnostic.
