Private equity is the type of finance provided to companies in return for an equity stake in the same companies. Most of such companies show the potential of growing at a faster rate, but they are not yet listed on the stock market. Instead of the companies going to the stock market to sell their shares for capital, the companies seek other methods of raising capital. Common sources for funding include pension funds, endowments, the insurance companies and rich individuals.
The private equity investment singapore is when the individuals and firms decide to invest in such high growing companies. The funds got from the investors and their personal coffers are used in building the company and growing its effect on the market.
The application of private equity investment will depend on the rules and regulations of a country. Like in Europe, private equity is treated as the entire range of the investment sector, which includes the management of buy-ins and buyouts together with the venture capital. However, in the US, private equity and venture capital are treated as different entities and investments. They are both still seen as the mainstream source of funding for a business.
The private equity firms expect that the investment is a long-term thing. Most of the time the investment can last for over 5 years before an investor decides to pull out. This type of commitment is what can make it easy for the business to become sustainable. For a period of 5 years, it can be easy to know if the business can keep on yielding good returns or it is time to pull out.
How to Invest in Private Equity
Before you can commit yourself to invest in private equity, you have to know more about the business first. Here are some factors to consider.
- The past returns of the business. The business has to show that it can deliver more returns in the near future based on its past performance.
- The minimum investment requirement is what determines how many people will invest. Just invest enough money that cannot be too much to lose just in case the investment does not yield as much as you like.
- The current management of the firm. You have to be sure that your money is in the right hands. Some managers can triple your money in a short time while others can easily waste it all. Do some research on the managers of the private equity firm before committing to doing business with them.