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Carried Interest Debate (Blog Post) (view source)
Revision as of 15:07, 10 June 2016
, 15:07, 10 June 2016→Text
Before considering the aforementioned complications, one must understand the basic structure of a private investment fund. These funds, set up as limited partnerships or limited liability companies, are organized under general partners and limited partners. The general partners are the funds' managers or managing firms, while the limited partners are the funds' investors. These investors are typically made up of financial institutions, pension funds, and wealthy individuals.
Types of private investment funds include private equity funds, venture capital funds, and , of course, hedge -funds. What are the differences between all of these funds? Here is a brief summary of each. Private equity funds generally invest in large companies with the intent to restructure and sell the firms for a gain. Venture Capital funds aim to invest in high-tech startups with high-growth potential in exchange for a stake in the company with the eventual goal of a liquidity event, i.e. a(n) acquisition, merger, or initial public offering. Hedge funds tend to focus on achieving high returns through risky investments that may come in the form of stocks, bonds, commodities, derivatives, and just about anything else that promises a strong gain. It is worth noting that, in practice, the distinctions between these funds can be blurred.
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