Private Equity
Private equity is distinct from real estate in that investors purchase homes and commercial properties to later sell for profits after a couple of days. Instead, private equity invests in large businesses. This could lead to an increase in investment returns because the profits earned from the business are distributed among all the investors who invested in the fund. Private equity firms earn lots of money from fees for fund management such as carried interest, the percentage of each deal’s profits.
As new managers are introduced to the market, they have a difficult task of raising a full fund as LPs have been concerned about their performance and have cut their allocations. However, a successful fundraising effort is dependent on planning and preparation. Before embarking on a fundraising journey, GPs need to know how they can reach their goals of committed capital. Fundraising is an exercise in momentum. They should also be clear on the sweeteners they’re prepared to offer–scale discounts such as first-mover or early bird benefits, etc.
Many PE firms use placement agents to connect with LPs, and promote their funds. These professionals receive a fee based on a agreed amount of money that the fund raises. As a result, it is vital for GPs to assess their investor relations team’s internal capabilities prior to enlisting the assistance of a placement agent.
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