4 Things You Should Know About Private Equity Funding

Private equity has become one of the most sought-after kinds of investment today. Typically it is a collective investment scheme which is done in equity securities (and to some extent, debt securities) to earn return on the initial investment sum. While it works on the simple principle of raising money and then earning returns on it, private equity funds are managed very carefully by investment professionals.

PE funding is flexible in the sense that funds can be traditional as well as asymmetric. While in traditional funding, all the investors invest with equal terms, the terms- as the name suggests- are different in an asymmetric funding. Well- established investors like Everstone Capital manage a series of varying PE funds through their focused strategies and industrial know-how.

Although you can very well depend on valuable names like these for all your investment requirements, here are few things that you should know about private equity funding.

·       Limited liquidity: This is one concept of PE funding which is almost a challenge to deal with. Private equity offers limited liquidity to invested funds, which means that your money would be locked up for duration as long as 10 years.

·       Investment control: As mentioned above, you have very less control on your money when you get associated with an investor managing your funds. However, under the case of limited partnership one can enjoy special rights and terms of investment.

·       Risks: This is the trickiest part of private equity funding. You can even lose all your investment especially in high risk PE funding like venture capital funds. What happens in venture capital funds is that the investment is done in the earliest phases of development of certain companies. This increases the risk factor of the investment. Further, it should also be noted that the investments done in privately held companies are riskier than those held in public traded firms.

·      Commitments: You can invest more or less than committed to your investors, on the basis of your experience with it. In case, you do not receive satisfactory results you can re-think your investment calls.

PE funding, therefore is ideal for investors who can risk losing their money in the expectations of receiving high returns and can lock their capital up for long duration. Depending on the strategies applied to private funding, the potential benefits may or may not outweigh the risk factors involved.