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Carried Interest Debate (Wiki Page) (view source)
Revision as of 12:02, 27 March 2017
, 12:02, 27 March 2017no edit summary
In reality, the lines between these types of funds can often be blurred, but the key distinctions can be summarized as follows:
*Private equity funds generally invest in large companies with the intent to restructure and sell the firms for a gain. These investments usually entail acquiring controlling interests in public companies through stock purchases, but they may also involve acquiring private companies. In the case of the public company, funds oftentimes take the company private before the resale or new initial public offering. The process by which private companies are brought to liquidity is similar sans the return from public to private. Private equity funds usually employ a long-term, hands-on approach to investment.
*Venture Capital funds aim to invest in high-tech startups with high-growth potential in exchange for a stake in the company. Once the fund purchases a stake in the company, it also provides coaching and other services to the company in order to increase its chances of success. Similar to private equity funds, venture capital funds invest with a hands-on, long-term strategy with the eventual goal of a liquidity event, i.e. a(n) acquisition, merger, or initial public offering. (more about VC [[Defining Venture Capital (Blog Post)| here]]).
*Hedge funds tend to focus on achieving high returns through risky, short-term investments that may come in the form of stocks, bonds, commodities, derivatives, and anything else that promises a quick gain. Accordingly, hedge funds tend not to adopt the same hands-on approach to investment that venture capital and private equity funds do.
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