Private Equity Fund Raising Deals

Private Equity

In contrast to real estate, where investors purchase homes and commercial properties and then sell them at a profit after several years private equity invests capital into large businesses. This can lead to a higher level of return on investment since the profits earned from the business are spread out across all investors who have invested in the fund. Private equity firms make significant profits from fund management fees such as carried interest, a portion of each deal’s return.

As new managers enter the market, they will face an uphill task to raise the full amount of funds as LPs are sceptical about their performance and have trimmed their allocations. Successful fundraising efforts are dependent on the planning and preparation. Before going on the road, GPs need to know how they can reach their target levels of committed capital. Fundraising is an art of momentum. They should also be clear about the sweeteners that they are willing to provide such as scale discount and early bird benefits, or first-movers.

Many PE firms use placement agents to connect with LPs and to promote their funds. They are compensated through an agreed-upon fee that is based on the total amount raised by the fund. This is why it is important for GPs to review their internal investor relations team’s capabilities before enlisting help of a placement agent.