What Are Private Equity Investments?
Curious about making some private equity investments? Face it, in today's horrible economy many people are losing money on their investments. This is why it is more important than ever to learn about private equity investments. Understanding how private equity investments work can help someone make their financial future what they want it to be.
Private equity investments are investments that are not traded on the public stock market. Buyout/growth funds and venture capital funds are the two different types of private equity funds. Private equity firms set up funds which raise money for their investors.
These investors are known as limited partners. These partners have no real say in how the company is run. They also only have a limited liability in the company meaning they are only liable up to the amount of money they invested in the company.
The private equity firms also invest their own capital and are known as general partners. These partners can use their money, an investor's money, and money borrowed from banks to buy companies that they believe with make them money.
These firms can buy companies that are traded on the public market, but once they buy them they will be taken off the public market. Limited partners make money from private equity investments when the value of that companies the private equity firms have set up increases.
There are many benefits to private equity investments. Private equity investments often slow down or even stop job losses in a company. Often times when a private equity firm takes over a company there are actually job increases within the company. Private equity firms are more likely to promote research and development than other companies. Private equity investments are also one of the biggest contributors to retirement plans.
Private equity investments sometimes require a long holding time, so the firm can have time to turn around a troubled company. However, even though the turnaround time can take awhile, a lot of people make a lot of money with private equity investments.