Business investments are not always the easiest types of investments to understand which is why we put together this piece to answer any questions which you may have about this investment vehicle. To assist us in answering those FAQs we have enlisted the support of the fund manager at TitleCard Capital, a large scale investment firm. Tyler Tysdal is an expert when it comes to all things that an investor needs to know ,and here are the answers to those burning questions which you have around private equity investments.
Is Private Equity and Venture Capital The Same?
This is a common misconception as both are investment vehicles which are used to invest in businesses. The key difference between these two investments is that venture capital is about investing in your businesses, whereas private equity seeks to takeover already established businesses. There are many differences in terms of ownership percentage, risk levels and which industries each investment vehicle is used for, this is what sets the two strategies apart.
Difference Between Private Equity and Hedge Funds?
The simplest answer here is that private hedge funds use investments to bring in short-term returns. This is why hedge funds generally manage stocks, futures and bonds. In contrast a private equity fund invests in private companies seeking long term gains on their investment. Through this investment vehicle the fund is able to impact opportunities and have a say in how their investment is managed, rather than leaving it up to the markets.
Who Benefits From Private Equity?
The simple answer here is that private equity investments benefit all parties involved. A private equity investment can help companies, their workers and even the local communities, not to mention helping the investor. Workers benefit from the strength of the company, sustainable jobs supports the local community and investors can use this vehicle to make strong profits.
Who Are Private Equity Investors?
These funds rely on the capital which is raised from a large group of investors. Generally speaking these are high-net worth individuals or funds such as pension funds of teachers, firefighters etc. Private equity generates strong performances which is why we have seen more pension funds dedicated to this investment.
What Are Capital Interest Gains?
Capital interest gains are payments which are made to the fund managers on a contractual basis, which is essentially a compensation which is given from putting money at risk. This payment will come from the profit which has already been made from the investment.
What Is The Goal of a Private Equity Investment?
Whilst financial gain is of course the clear goal here, private equity investors seek to put their money into companies with growth potential, and will work directly with them to either grow or to turnaround the company. The eventual goal in most cases is to give the business a new lease of life and then turn the company public.
There you have it, any more questions put them in the comments section below.
