What is a private equity fund

The so-called private equity funds is through non-public way, a small number of institutional investors to raise funds for the fund established. As the private equity fund sales and redemption of all fund managers and investors through private consultations carried out, so it is called raising the funds to specific objects. And closed-end funds, open-ended funds, compared with government-raised funds, private equity has very distinct characteristics, it is also a public offering to fund these features can not compare. First, private equity funds raised through private means. In the U.S., mutual funds and pension funds-raised funds, usually through public media advertising to attract customers, according to relevant regulations, private equity is not to use the media to do any advertising, its participants, mainly through access to the so-called "investment reliable sources ", or direct knowledge in the form of fund managers to join. Second, raise the object, the object is only a small number of private equity investors in particular, the circle is small threshold is not low. In the United States, hedge funds have very strict on the participant states: If a personal capacity, the last two years personal annual income of at least 20 million or more; If the family name to participate in family income of at least the past two years 300 000 U.S. dollars; If the name of participating institutions, with a net worth of at least 100 million or more, but the number of participants also have corresponding limitations. Therefore, the private equity fund's investment objectives with highly targeted, it is more like the middle-class investors, investment services tailored products. Third, and government-raised funds strict information disclosure requirements are different, private equity funds are much lower this requirement, coupled with appropriate government regulation is also more relaxed, so private equity investments in more subtle, and more flexible operation, a corresponding high return greater revenue opportunities. In addition, private equity is characterized by a significant fund sponsors, investment managers must own fund management company, the success of the Fund's operation and is closely related to their own interests. From the perspective of international common practice now, fund managers generally hold the fund of 3% - 5% stake in the event of loss, management-owned shares will first be used to pay the participants, therefore, private equity fund sponsor , the manager and the fund is a mutual dependency, woe the interests of the community, which has to a certain extent, solved the public offering the interests of fund managers constraints inherent weakening of incentives is not enough and other defects.