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Private Equity Fund Formation

3 Feb

by Scott W. Naidech, Chadbourne & Parke LLP

Private Equity Fund Formation by Scott W. Naidech, Chadbourne & Parke LLP

Private Equity Fund Formation by Scott W. Naidech, Chadbourne & Parke LLP

 This white paper provides an overview of private equity fund formation. It covers general fund structure,fund economics, fundraising,fund closings and term, managing conflicts and certain US regulatory. It also examines the principal documents involved in forming a private equity fund.Private funds are investment vehicles formed by investment managers, known as sponsors, looking to raise capital to make multiple investments in a specified industry sector or geographic region.

Private funds are “blind pools” under which passive investors make a commitment to invest a set amount of capital over time, entrusting the fund’s sponsor to source, acquire, manage and divest the fund’s investments. The key economic incentives for sponsors of funds are management fees and a profit participation on the fund’s investments. The key economic incentive for investors is the opportunity to earn a high rate of return on their invested capital through access to a portfolio of investments sourced and managed by an investment team that is expert in the target sectors or geographies of the fund.

This document does not cover the new SEC guidelines governing Equity Crowdfunding, but it does give a 20-page summary of forming private equity funds.

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