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Structure of a typical, PE Fund

A Private Equity Fund is usually set up and run by a professional, partnership firm.  Institutional investors like, pension funds, insurance companies, sovereign wealth funds, foundations, etc., join the firm as Limited Partners (LPs), and contribute cash.  The PE Firm usually contributes between 5-15% of the corpus while, the rest is pooled in by LPs.  The PE Firm will create various funds, may be with different themes or focus, like “India Fund” or “Infrastructure Fund”.  These funds make investments in investment seeking companies.  The illustration shows the typical structure.

Description: Private Equity (PE) Fund Structure

Why should an unlisted company raise private equity in the first place?  What are the benefits private equity vis-à-vis loans/ borrowings?  What are the risks? What could be the pitfalls? To know the answers to these and innumerable questions, dig deeper.

 

 

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