Why Efficient Private Equity Management Is Important For Organizations?

Private Equity is a complicated concept. One needs to understand the term before investing in a Private Equity Fund and understanding its long term implication. An investment scheme for the purpose of making collective investments in various equity securities in accordance with an investment strategy associated with private equity is called a PE Fund. India has many people who consider private equity funds to be hedge funds. However, there is a difference between the two that needs to be understood. A hedge fund aims to provide the highest investment returns possible in the minimum amount of time. To make this possible, hedge fund investments are made in highly liquid assets primarily, enabling the fund to earn profits on one investment in a short period of time and then transfer funds into another investment. Hedge funds invest in almost anything and everything –derivates, bonds, commodities, currencies, individual stocks, and arbitrage– whatever the fund manager sees as offering high potential returns in a short period of time. 

The main focus of hedge funds is to earn maximum profits in a short period. Private equity funds are more closely related to mutual funds, in the sense that they invest directly in companies, generally by purchasing equity in private companies, although sometimes they seek to acquire control in publicly traded companies by engaging in stock purchases. They commonly use leveraged buyouts to purchase financially distressed companies. Unlike hedge funds that are focused on short-term profits, private equity funds are focused on the long-term potential of the portfolio of companies they hold an interest in or acquire. Everstone Capital is widely considered to be the market leader in private equity fund management or Real Estate Fund in India. Once they gain control in a company, private equity funds aim to improve the finances of the company through changes in management, streamlining operations or initiating expansion projects, with the ultimate goal of selling the company for a long term profit, either privately or through an initial public offering on a stock exchange.

To achieve their long term aim, private equity funds usually have, apart from the fund manager, a group of experts in corporate dealings who can be given the responsibility of managing the acquired companies. The nature of their investments requires their more long-term focus, looking for profits on investments to mature in a few years rather having the short-term quick profit focus of hedge funds.