El "private equity ' es un amplio término que refiere a cualquier tipo de inversión en un activo en el cual la equidad no sea libremente tradable en un ámbito público . Las categorías de la inversión de equidad privada incluyen compra de participaciones apalancada, capital de empresa, capital del crecimiento, capital del entresuelo y otros.
2006-09-09 13:46:26
·
answer #1
·
answered by MIAUU 6
·
0⤊
0⤋
Private equity
Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. Categories of private equity investment include leveraged buyout, venture capital, growth capital, angel investing, mezzanine capital and others.
Private equity securities
Private equity refers to securities in companies that are not listed on a public stock exchange; while technically the opposite of public equity they are broadly equivalent to stocks, though return on investment often takes much longer. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a traditional marketplace such as a stock exchange. In addition, there are many transfer restrictions on private securities. This long term investment area currently has over $710 billion in assets.
The sale of private securities is used by companies to generate capital. Investors generally receive their return through one of three ways: an initial public offering, a sale or merger, or a recapitalization.
Considerations relative to other forms of investment include:
* Very high entry point costs, with most private equity funds requiring significant initial investment (upwards of $100,000) plus further investment for the first few years of the fund called a 'drawdown'.
* Once invested, it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as twelve years. Private equity investments are thus referred to as "illiquid" investments which should earn a premium over traditional securities, such as stocks and bonds.
* If the private equity firm can't find good investments they may end up returning some of your money back to you. Given the risks associated with private equity, you can lose all your money if the private-equity fund invests in failing companies. The risk of loss of capital is typically higher in venture capital funds, which back young companies in the earliest phases of their development.
* High fees which often exceed that of hedge funds: as much as 2.5% for management fees and 20% or more as the performance fee.
* Consistent with the risks outlined above, private equity can provide high returns, with the best private equity managers significantly outperforming the public markets
For the above mentioned reasons, private equity investment is for those who can afford to have their capital locked in for long periods of time and who are able to risk losing significant amounts of money. This is balanced by the potential benefits of annual returns which range up to 30% for successful funds.
[edit]
Private equity firms
Generally, private equity funds are organized as limited partnerships which are controlled by the private equity firm that acts as the general partner. The fund obtains commitments from certain qualified investors such as pension funds, financial institutions and wealthy individuals to invest a specified amount. These investors become passive limited partners in the fund partnership and at such time as the general partner identifies an appropriate investment opportunity, it is entitled to "call" the required equity capital at which time each limited partner funds a pro rata portion of its commitment. All investment decisions are made by the General Partner which also manages the fund's investments (commonly referred to as the "portfolio"). Over the life of a fund which often extends up to ten years, the fund will typically make between 15 and 25 separate investments with usually no single investment exceeding 10% of the total commitments.
General partners are typically compensated with a management fee, defined as a percentage of the fund's total equity capital, as well as a carried interest, defined as a percentage of profits generated by the fund (so long as some minimum return for the investors called the hurdle rate is achieved). Typically, general partners of funds will receive an annual management fee of 2% of committed capital and carried interest of 20%. (Although typically, the carry is reduced by the amount of the management fees received). Gross private equity returns may be in excess of 20% per year, which in the case of leveraged buyout firms is primarily due to leverage, and otherwise due to the high level of risk associated with early stage investments. Although there is a limited market for limited partnership interests, such interests are not freely tradeable like mutual fund interests.
2006-09-09 13:14:40
·
answer #4
·
answered by brian m 4
·
0⤊
1⤋