Investing

Private equity investment

  • Last Updated:
  • May 6th, 2021 8:23 am
[OP]
Deal Fanatic
May 22, 2003
8202 posts
5073 upvotes
Vancouver

Private equity investment

Has anyone here invested with private equity firms before and can give any feedback on the process? Is there usually a minimum buy-in? Here's one I'm interested in: https://caifunds.com/this-b-c-private-e ... ors-money/

The only downside I can think of, is that your money is locked in until sale of the companies in the fund.
3 replies
Deal Addict
User avatar
Oct 14, 2015
1618 posts
1631 upvotes
First thing, check out what Dan Hallett has to say under the heading "What are the risks?".
https://www.morningstar.ca/ca/news/2018 ... quity.aspx

With any private investment, by the time you have read 40 to 60 pages of Offering Memorandum and signed in 5 different places, you will realize that the managers can do whatever they want with your money, and as long as it isn't anything illegal, you have no say in the matter.

I've invested in at least half dozen private equity adventures, and only one delivered as it was expected to do.

Look for a track record of the people who have set up the investment. If this is their first game, forget about it. Even if they are honest, there's a good chance that inexperience will take them down. If they can show that they have done something similar three or four times previously, and the results were profitable, then you have cause to begin researching what they now have to offer.
Newbie
Apr 21, 2021
4 posts
Toronto, ON
Hey there,

The one thing you need to understand about Private Equity is this - you truly invest at your own risk. Prospectus-exempt securities are not subject to the same rigorous reporting standards as publicly traded securities (quarterly/annual reports, audits by big 4 accounting firms, analyst insights etc.), and you need to take the time to do your homework and understand the types of investments being made, who the manager is, and their track-record (as Irwin said).

Private equity investments are typically for savvy investors only, or those with sufficient net investible assets (NIA) who are willing and able to accept liquidity risk, in addition to market risk pertaining to the industry or investment style in question. For example, if a potential private equity investment does LBO's of mining companies, you may be taking substantial credit/interest rate risk, coupled heavy exposure to certain commodity prices. Because private equity describes a type of investment, every PE deal will have a different risk profile - though most share similar risks (liquidity).

Irwin is also right in saying that - once you invest in a PE fund - the PE firm has A LOT of leeway in terms of investing - they can pretty much do what they please.
But this isn't a bad thing. This is what you're paying them for - their expertise.

In terms of minimum investment amount, it really depends on the fund manager. There are funds out there that require a $250K minimum, and there are funds out there that require a $25K minimum.

The point i'm trying to make is, do your homework, become an informed investor, and take the time to assess your own risk profile.
What risk are you ABLE and WILLING to take (there are often times not the same thing).

Hope this points you in the right direction. There is a lot that can be said on this topic - I advise you to do as much research as you can before taking the plunge. Best of luck to you.

Disclosure: I work for a PE firm in Canada, specializing in Real Estate.
Deal Addict
Dec 8, 2020
1141 posts
1287 upvotes
Toronto
notenoughsleep wrote: Has anyone here invested with private equity firms before and can give any feedback on the process? Is there usually a minimum buy-in? Here's one I'm interested in: https://caifunds.com/this-b-c-private-e ... ors-money/

The only downside I can think of, is that your money is locked in until sale of the companies in the fund.

as noted in the above replies ...

what I can add is that over the past 50+ years I have invested in many different vehicles including private equity RE, seed money, start-up's, capital bonds, discount second mortgages, private & public MIC's, actual real estate fix & flip with a contractor ....

what you learn is how to lose money based on a promise of higher return than what you'd get in an index fund.

if you are OK with the risk, the possibility of losing all your investment - add to that the stress, then go for it.

there are zero guarantee's in private equity investment or the stock market.

psychology plays an important part in investing

on a personal note, I have offered private equity investment to acquaintances (at work & neighbours) - the investment was secured with gold bullion which I handed over that they would hold onto till the investment matures.

what I offered was 5% 12 mth locked in, min/max $10,000/individual.

because I was an individual with no flashy website or 50 pages of offering/term sheets - no one took me up on my offer.

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