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Private Equity Fund Resources Toolkit
Practical Law Toolkit w-030-8757 (Approx. 5 pages)
Private Equity Fund Resources Toolkit
by Practical Law Corporate & Securities
| Maintained • USA (National/Federal) |
Resources to assist outside and in-house counsel in understanding the fundamentals of private equity funds. For a comprehensive list of available resources on this topic, see Private Equity.
Private funds are investment vehicles formed by investment managers, known as sponsors, looking to raise capital to make multiple investments under a specified investment mandate. Private funds are "blind pools" under which passive investors make a commitment to invest a set amount of capital over time, entrusting the fund's sponsor to source, acquire, manage, and divest the fund's investments.
The key economic incentives for sponsors of funds are management fees and a profit participation on the fund's investments. The key economic incentive for investors is the opportunity to earn a high rate of return on their invested capital through access to a portfolio of investments sourced and managed by an investment team that is expert in the target sectors or geographies of the fund.
Private funds can have different investment types and purposes, such as:
- Venture capital funds that invest in early and development-stage companies (for more on these kinds of investments, see Practice Note, Minority Investments: Overview).
- Growth equity funds that invest in later-stage, pre-IPO companies or in PIPE transactions with public companies (for more on these kinds of investments, see Practice Notes, Growth Equity Investments and Practice Note, PIPE Transactions).
- Buyout funds that acquire controlling interests in companies with an eye toward later selling those companies or taking them public (for more on these kinds of investments, see Practice Notes, Buyouts: Overview and Going Private Transactions: Overview).
- Distressed funds that invest in debt securities of financially distressed companies at a large discount (for more on these kinds of investments, see Practice Note, Out-of Court Restructurings: Overview and Article, Distressed Debt Investing: A High Risk Game).
Funds may also be formed to invest in specific geographic regions (such as the US, Asia, Europe, or Latin America) or in specific industry sectors (such as technology, real estate, energy, health care, or manufacturing).
This Toolkit provides a collection of resources to assist outside and in-house counsel in understanding the fundamentals of private equity funds.