Investing A collective investment structure used to make an investment in a number of equities and to some extent debt is known as private equity funds. These types of funds are generally limited partnership for a term of 10 years. At the .mencement, institutional investors undertake to make an unfunded pledge to the partnership of a limited .pany, which is then careworn over the entire term of the private equity fund. Like mutual funds in India, even a private equity fund is also raised and managed by a bunch of investment professionals who are employed by a private equity fund management firm. Ideally a single firm manages a series of different private equity funds and as part of their work will also attempt to raise new equity funds every 3 to 5 years. Most such funds are structured as LPs (Limited partnerships) and thus are governed by the terms put forward in the LPA or Limited partnership agreement. These types of funds have a GP or a general partner, who are responsible to raise capital from the well-off institutional investors, such as high net worth individuals, endowments, foundations, insurance .panies, universities and pension plans. These individual investors invest in the fund as LPs or Limited partners. The terms which are put forward pertaining to the governance of such funds are myriad. Here in this article a few of them are discussed in broad-terms. Duration of the partnership- the term of the partnership is ideally a fixed-life investment which ranges typically for 10 years with a provision of some limited number of extensions. Management fee-the investors make an annual payment to the tune of 1 to 2% of the total .mitted capital towards the fun as part of the professional fees for the manager of the fund. Preferred return or hurdle rate- this is the targeted minimum rate of return which must be attained before the managers can receive their payment under the head of Carried interest. Change of hand/title-private equity funds are not projected to be traded or transferred; however they are free to be transferred to other investors. Restraints for General partners-the manager of the fund have influential discretion to undertake any investment decisions and thus control the entire affair of the fund. However the limited partnership agreement does have some controls and restrictions and is limited to the size, type or the geographic focus of permitted investment. There is also a restriction on the duration for which manager is allowed to make new investments. About the Author: 相关的主题文章: