5 Key Points Every Person Should Know about Private Equity Firms

Well, if you are thinking about investing in a private equity firm, then you simply need to know some significant things about the particular process. But before going to meet with all those main 5 points, one should consider each term, such as what is private equity, secondary liquidity, and many other things as well. Therefore, let’s start with private equity. It refers to investment funds, which is mainly created as limited partnerships that purchase and restructure companies that are not traded publically.

In other words, you can say that it is a type of equity that contains equity securities and also the debt in companies that are operating that are not traded publically. Such types of equity funds are made by venture capital, angel investor, and private equity firm. Now, it’s time to know what secondary liquidity is. So, it means that it’s the ability of IPO investors by which they sell shares in the secondary market. It depends on private equity firms to handle Secondary Private Equity Liquidity and all other things accordingly.

5 points people about Private Equity Firms

Given below are the main 5 points that all individuals should know about private equity firms before going to engage with them in any type of business.

1.      By investing you become a limited partner – 

The particular thing means that when people invest in private equity funds, then they are called limited partners. Another main thing is that the limited partners have no decision power on the equity firm that is private or also on the investments that are made by the fund. 

2.      The investment you made is your commitment –
 

The main thing you should know is that with the funds of private equity, there is no liquidity present, and also, the private equity fund has a limited lifespan of almost ten years. So, the same thing means that by investing, you are making a commitment of almost ten years with the firm.

3.      Capital is returned after a specific time –

It is the best thing about private equity firms. After a specific period of time, the capital you made is returned to you. The company has full authority to return capital to its limited partners. They have the power to sells any company for the purpose of creating a distribution or for refinances.

4.      Know that some funds are having time limits –

Well, the same thing means that there are some private equity funds groups present that are having limited time limits for funds in their agreement. The limit for some funds is almost 6-7 years.

5.      These firms reporting requirements –

Here it means that when the fund’s life is going, then they are reporting the requirements of limited partners. The financial report about finds comes out quarterly to meet all requirements.

Therefore, these are the main 5 points, or you can say things to know about private equity firms. Also, they provide Liquidity For Private Equity Funds to make a deal within any case to resolve distributions and for refinancing process.

Better Liquidity for Private Equity Funds

Private Equity Funds are formed with the combination of several high net worth individuals. PE Funds require vast amounts of around$250,000. The funds park their funds in good companies for decent returns over an extended period. They are considered illiquid because your funds are locked in for several years. You may ask ‘what is the way out for liquidity for private equity funds’. Companies use PE funds either for expansion to acquire a controlling stake in other companies. The only way to get funds for your needs is through selling a stake in that company. Accredited investors can offload their stake in that firm to another investor or fund. It becomes  secondary private equity and ensures liquidity.

Best private equity funds in 2019

Some private equity funds include Blackstone, Carlyle Partners VII, Traveller Capital Partners II, Dover Street IX, Headlands Capital Secondary Funds II, Cervin Ventures II Opportunities Fund, Ocean Avenue Funds III, Industry Ventures Partnership Holdings IV, Petershil Private Equity, Bain Capital Europe V, and American Securities Partners VIII.

The private equity funds buy a stake in some firms from other private equity funds. It ensures liquidity for private equity funds that intend to diversify or meet the redemption needs. However, it takes a long time to finalize the deal, and the drafts are to be completed by the legal experts.

Improve limited partner liquidity using a qualified matching service

The limited partners (LPs) that form the private equity fund face a challenge in balancing their portfolios. NASDAQ that provides alternative liquidity solutions supports LPs secondary transactions. We at NYPPEX private markets offer an end to end transaction cutting edge technology and qualified matching service for LPs ensuring smooth transfer process and cash settlement.

What is a qualified matching service?

If the limited partners indulge in frequent transfers in a fund, it is called a publicly traded partnership (PTP). The numerous transactions attract tax. Interests in the PTP can be traded either on a secondary market or an established securities market.

A facts and circumstances sheet is used by IRS to check whether partners are ready to sell or buy or swap the partnership interests in an economical and comparable manner for trading on securities market.

You can seek the help of qualified matching service offered by NYPPEX private markets to transfer up to 10% of the interests in your partnership during the taxable year.

Standards of qualified matching service under section 1.7704.1(g)

It should have a printed or computerized listing system to show the bids of customers or ask quotes allowing the matching partners to sell their interest to those, who are interested in buying such interests.

The selling partner has to wait until the 15^th calendar day to sign the binding agreement after a sale offer is made to a potential buyer. You can refer the centrally maintained record to verify the evidence.

You can do matching either comparing the list of sellers and buyers or through ask or bid process. You can reach NYPPEX private markets for more details in qualified matching service.