Private Equity Funds
Chuck Roberts of The CR Wealth Management Group of Stifel serves as Managing Director/Investments at Stifel’s New York City branch, where he primarily serves ultra-high net worth clients who come to the firm via referral. Chuck Roberts serves this select group of investors by channeling their assets into a set of products, which may include private equity.
When one of Chuck’s clients decides to select private equity as an investment product, he will channel their funds into a specific company. A private equity fund contains the assets of a number of investors, whose capital goes toward purchasing a percentage of a company.
If a private equity fund does not contain sufficient funds to purchase a company, it may borrow the remaining amount. This allows for a greater investment that – if the purchased company does well – may yield higher investment returns. With that said, borrowing the remaining amount would also entail higher potential risk.
Private equity funds most often invest in historically established companies. Often, the investment precedes active efforts by the fund to encourage growth, so as to guide the purchased company toward a profitable sale. For these efforts, funds generally receive a management fee in addition to a percentage of any profits earned, though profits are never certain when one enters into a private equity investment.
Private equity funds are not appropriate for all investors. Investors should be aware that private equity funds may contain speculative investment practices that can lead to a loss of the entire investment. Private equity funds may invest in entities in which no secondary market exists and, as such, may be highly illiquid. The funds are not required to provide periodic pricing or valuation information to investors and often charge high fees that can erode performance. Additionally, they may involve complex tax structures and delays in distributing tax information.
Article provided by Chuck Roberts, Managing Director/Investments with Stifel, Nicolaus & Company, Incorporated, Member SIPC & NYSE, who can be contacted in the New York, New York office at (212) 328-1000.
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