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