Private Equity Fund Raising Deals

Private Equity

Unlike real estate, where investors purchase homes and commercial properties, which they then sell to make a profit over several years private equity invests capital in large companies. This can result in an increase in the investment limit because the profits of the business are shared with the investors who invested into that fund. Private equity firms make significant profits from fees for fund management and carried interest, as well as an amount of the deal’s returns.

As new managers enter into the market, they’ll face an uphill task of raising a full fund. LPs are apprehensive about their performance and have reduced their allocations. Successful fundraising efforts are dependent on the planning and preparation. Before stepping out on the road, GPs need to know how they will reach their target levels of committed capital. Fundraising is an art of momentum. They should also be clear on the sweeteners that they are willing to offer such as scale discounts early bird discounts or first-movers.

Whether the target is an investment vehicle for the first time or a buyout fund, many PE firms use placement agents to help connect with LPs and promote their funds. They are paid a fee based on a negotiated amount that the fund raises. In this way, it is important for GPs to examine their internal investor relations team’s capabilities before enlisting help of an agent to place the fund.

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