There are important differences between investing in public equity and a private equity fund: First, Funds are commited in the private investments and later drawn down as capital is utilitzed by portfolio comapnies. In a public firm, the commited capita is usually immediately deployed. I dont really understand the first sentence " later drawn down as capita is utilized by portfolio companies…" Thank you!
yellayella Wrote: ------------------------------------------------------- > There are important differences between investing > in public equity and a private equity fund: > > First, Funds are commited in the private > investments and later drawn down as capital is > utilitzed by portfolio comapnies. > In this structure, as an investor, you will have to “commit” to a certain amount of funds that you are going to invest, say 1 million dollars. The first year you might only have to put in 250K though. At year two you might be asked to put in 500K. This second payment of 500K is a “capital call”. You will eventually get “called” for the entire amount. In other words, the PE fund doesn’t take all the money and invest the part they aren’t using. They only ask for it as needed.