Private Equity Fund Raising Deals

Private Equity

In contrast to real estate, where investors buy homes and commercial properties to sell them for profit within a few years the private equity fund invests capital into large corporations. This could result in an increase in investment limits because the profits of the company are shared among the investors who invested in the fund. This is what makes the industry so lucrative for private equity companies which earn profits from their fund management fees as well as carried interest and a portion of each deal’s profit.

As new managers join the market, they will face an uphill battle to raise the full amount of funds as LPs are sceptical about their performance and have reduced their allocations. However, a successful fundraising effort relies on planning and preparation. Fundraising is a game of momentum and GPs should be able to clearly define their path to reaching their targeted levels of committed capital prior to getting out on the road. They should also have clarity about what sweeteners are willing to offer such as scale discounts such as first-mover or early bird benefits, etc.

Many PE firms employ placement agents to connect with LPs, and promote their funds. These professionals are paid a fee based on a agreed upon amount that is that the fund raises. It is essential that GPs evaluate their internal investor relations team prior to enlisting a placement agent’s help.