ENG ELC 220 Lecture Notes - Lecture 3: Peer Group, Downside Risk, Private Equity Fund
30 Oct 2020
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Document Summary
Investing in private equity fund is often labor intensive. Based on relationships and some of the best funds are hard to identify or tend to be oversubscribed. Difficult to create small, diversified portfolios as minimums to access funds are often greater than what individual high-net worth investors are able, willing or ought to commit. Business model based on acquiring control of companies to increase the market value of their pooled capital through active management and then exiting at a later stage at a profit. Many of their investee firms are unlisted companies. Managers of private equity fund investments work in partnership with the firms they invest in to create value by growing revenues and profits. Fund manager skills have a more significant impact on fund returns. Information is largely private much more hands-on approach to selecting companies. Allows manager to capture economic rents which would not be possible if information was available publicly.
