Intro to Private Equity Funds

Institutional investors and high-income and net-worth individuals searching for investment opportunities may want to consider private equity funds. Insurance companies and pension plans often invest a portion of their large portfolios in them. For that reason, you may already have investments in a private equity fund even though you are not aware of the investment. A South Carolina corporate attorney can provide additional information and guidance for accredited investors and qualified clients searching for investment opportunities with private equity funds.

What are Private Equity Funds?

Private equity funds are similar to hedge or mutual funds as they involve pooling money from several investors. An adviser uses the pool of money from investors to make investments in private companies on behalf of the fund.

However, these are different from hedge funds or mutual funds in that investments are typically based on a longer investment term, typically 10 or more years. Many of them impose restrictions or limits on an investor’s ability to withdraw investment. Investors may need to hold the investment for several years before they realize a return on the investment.

Investors in a private equity fund are not active participants in the management of the fund or the choice of investments. The fund manager is responsible for managing the investments and locating investment opportunities for the fund. A private equity fund may make minority investments in companies, or it may assume a controlling interest in a company so that it can actively engage in the company’s management.

Most private equity funds operate as a “blind” fund. In a blind fund, investors do not know in advance how funds will be invested, and investors in the fund are not aware of the identities of the other investors.

Who Can Invest in Them?

Accredited investors and qualified clients may invest in private equity funds. These are limited to these types of investors because these investors can provide substantial amounts of capital needed for investments over extended periods.

Investments must remain for longer periods so that fund managers can work with the companies purchased by the private equity fund to increase the value of the company. After several years, the fund manager will “exit” the company by selling the company or taking the company public.

How Can a South Carolina Business and Corporate Law Attorney Help?

A South Carolina business and corporate law attorney can assist firms in structuring new private equity funds and negotiating the terms for investors who want to contribute money to the fund. An attorney is also needed to prepare various documents such as partnership agreements, operating agreements, and investor subscription agreements.

The role of a South Carolina business and corporate law attorney is to advise clients on the constantly changing compliance and regulatory issues related to ERISA, tax, and international securities laws. Contact Willcox, Buyck & Williams, PA today. Compliance matters can be challenging. Working with experienced attorneys who understand the laws related to private equity funds can help avoid compliance problems and legal issues during the long-term investment period.