The funds invested in private companies directly are called private equity funds. These funds are parked in unlisted private companies. Investors need to get prepared for longer investment periods. Therefore, private equity funds are ideal for institutional investors and retail investors, who could invest large sums and hold for longer periods.
Private companies use private equities for business expansion. The private equity fund helps the companies to strengthen their balance sheet and invest in new technologies to improve their product line and launch new products and compete with their peers and generate significant returns for the stakeholders.
High net worth individuals and institutional investors can benefit from PE funds in the form of higher returns. The holding period for PE funds can range from ten to thirteen years. You can approach Joseph Stone Capital to select the best private equity funds and park your unused capital for significant returns. The investors can get back their investments after the holding periods along with returns.
Types of investors
Investors are classified into passive and active investors. Passive investors solely depend on private company management to generate significant returns. On the other hand, active investors provide operational support to the management of private companies and help them grow.
The private equity companies maintain healthy relationships with CFOs and CEOs of private companies and get insights into their operations and synergies. Such companies are involved at the operational level and facilitate the growth of a private company.
Creation of value by private equity funds
The private equity funds focus on portfolio oversight and transaction execution/ deal origination. As part of the deal origination, PE funds assist in mergers and acquisitions by acting as investment banks and intermediaries to ensure the flow of high-quality deals and high quantities. In the transaction execution, the PE funds assess the industry, capabilities of the management, forecasts by analyzing the historical financials, and estimates the value of the industry.
The private equity funds appoint their internal staff to generate transaction leads by reaching out to the owners of private companies. It helps them to save costs associated with the transaction. Therefore, they can save the fee of middlemen in the transactions. The fund managers at Joseph Stone Capitalare experienced in mobilizing funds for PE funds and managing them to generate enhanced returns with reduced risks.
The fund managers along with deal professionals like accountants, investment bankers, consultants, lawyers conduct the due diligence before deciding to acquire a stake in a private company. Investors can benefit from untapped potential in private companies. It helps to enjoy decent returns in the long term. The PE funds also invest in companies that do not perform well in exchanges.
The PE fund investment strategies include Growth Capital, Venture Capital, Distress/ Turnaround situations, and Managed or Leveraged Buyouts. The Venture Capital fund provides investment for companies that are in the initial stages of operation and do not have access to low-cost loans and funds.
The Growth Capital focuses on already established private companies and has not yet acquired the required assets. Such companies can benefit from PE funds for the expansion of business operations. The Management Buyouts provide leverage to the existing management of private companies and help them achieve the set goals. The companies suffering from a lack of funds and distressed balance sheets can benefit from PE funds to strengthen their balance sheets and make a turn-around.
The private equity fund companies invest in startups, small businesses, and other private companies that need funds for working capital and business expansions and improve them. It divests the improved companies after enjoying significant returns on their investment.