If your goal is to create real wealth, it is recommended that you, as an investor, get in on the ground floor. Private equity investment is all about investing in the right people. By investing in small to medium sized businesses in the early stages of the company cycle, you can open yourself up to some incredible results and returns. There are also several different financial and investment advisors that can assist you in ensuring you invest in a true gem. When opting for a private equity investment, it is of utmost importance that you pay close attention to the person themselves. Do they operate on a higher level? Are they a creative, out of the box thinker? Do they have a strong vision for their business? All of this needs to be taken into account when looking for an individual to partner with.
To assist you, everything you need to know about private equity investments will be discussed in this article, beginning with the definition. A private equity investment essentially refers to investing in unlisted companies at different stages of their development with the intention of creating added value.
Now that you know exactly what a private equity investment is, you may be considering such an investment. If you are, it is important to note that there are several different factors to take into consideration, some of which will be discussed below.
For starters, if you invest in private equity, you are considered a limited partner. This essentially means that you have no authority in the decision-making of the private equity firm, nor the investments made by the fund. Instead, the firm will serve as the general partner and has complete control over the funds’ investments.
Secondly, a private equity investment is a commitment. When it comes to these types of firms, there is generally no liquidity, and they often have a lifespan of around 10 years. You are making a commitment for a period of up to ten years. However, your capital will be returned over time. Should a private equity fund sell a company or refinance to create a distribution, capital will be returned to its limited partners.
Lastly, there are reporting requirements to the limited partners during the fund’s life. This means a financial report will be sent out to discuss the funds, such as where it has been invested, what has been returned, as well as its current value. In some cases, firms will hold annual meetings with the limited partners of a specific fund.
If you are interested in opting for a private equity investment, ensure you utilise the knowledge and expertise of a reputable financial service provider. Not only will they be able to guide you on which private equity firms are the best to invest in, but they will also ensure you do not invest your capital with the wrong person. Your best bet in finding a reputable financial service provider would be to ask for recommendations, as well as look at what previous clients have said about the respective service providers.
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