Traditional Private Investment Vehicles
For years, institutional investors, accredited investors and
qualified clients have had access to alternative assets and
strategies through investments in private investment vehicles, such
as:
Hedge Funds
Investment vehicles used to pool investors' money together into
a range of investments, typically implementing a variety of
sophisticated techniques. Hedge funds themselves are not easily
classified into one type of risk/return category. Each manager uses
different investment strategies, has different return goals and may
or may not employ varying amounts of leverage.
Venture Capital Funds
Provide financing and some participation in business decisions
for a new or young company with potential for large returns in the
future. They are possibly the most risky form of private equity
because of uncertainty and risk in the future of those
companies.
Private Equity Firms
These firms primarily look to invest large amounts of money into
a small private company that is not traded on a public stock
exchange-often either in preparation for an Initial Public Offering
(IPO), or as a takeover of a public company that is struggling and
needs reorganizing and/or restructuring.
The appeal of private equity investments lies with the potential
of profiting from a company's turnaround with large monetary
payouts and the possibility of an IPO. Entry into private equity
often requires substantial investments-sometimes upwards of
$1,000,000 and a lock-up period of multiple years.
Limited partnerships are the most prevalent form of private
equity investment. While there is no involvement with the
day-to-day running of the business, investments in a limited
partnership may be locked up for 10 years or more.
 
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