Private equity fund raising is an intimidating (but necessary) part of starting up an investment company. Making use of your network is the best method of finding the right LPs to help you achieve your goal of committing capital, but this requires careful managing relationships using the appropriate procedures and tools.
LPs are investors who invest capital to the private equity fund. They are often large institutional investors like pension funds, endowments, and mutual funds. In other cases they are high-net worth individuals or family offices looking for an increase in their investment in funds for private equity. In addition, certain LPs may be funds-of-funds that have the resources to invest in a variety of private equity funds. They can help you create a portfolio that is diversified.
You must meet certain requirements to be a LP. Generally speaking, LPs require an investment strategy that is in line with yours, a track record with a similar approach, and an intention to invest. They also require you to be knowledgeable about the operations of your fund and to be able explain why it’s worth investing.
To maximize the value of your LP relationships it is recommended to have your legal team prepare your partnership memorandum, offering terms and a subscription agreement prior to when you begin to search for potential LPs. It’s also a good idea operationalroom.com/a-virtual-data-room-or-box-which-should-you-use to assess your own capabilities in investor relations and look into hiring a placement agent.
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