FIN 501 Chapter Notes - Chapter 6: Net.
22 Jun 2014
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Private equity vs selling securities to the public. Private equity funds and hedge funds share some characteristics o. Investment companies set up as limited partnerships pool money from investors invest money on behalf of investors: built in constraints to prevent fund managers from taking excessive compensation. Claw back provision make sure manager receives only the agreed upon performance fee o. Fee paid reduces the net return of the fund: do not take any performance fees until fund is liquidated, performance fee for private equity firms carried interest. Provide diversification benefits night not be a reasonable choice for investors: must be a qualified investor (rich) o. Funds are really illiquid more illiquid than hedge funds. Typical private companies started by raising money from investors: managers invest in private companies intention of improving them and subsequently existing (ipo, stated life of 7-10 years makes for a illiquid investment.
