Private Equity Services
The Investor’s Role in Private Equity
Private equity investments by individual investors typically follow a standard pattern.
First, the investor makes a capital commitment that obligates the investor to commit a certain amount of capital to a company or fund over a defined period, which is usually three to five years. That commitment is memorialized in a binding investment agreement. Given the risks of private equity investments, these opportunities are offered only to accredited investors.
Next, if the investment is made in conjunction with a fund, that fund's manager will make one or a series of capital calls against the aggregate sum in the fund if and when that manager has elected to make an investment in a private equity target company. The investor will then be obligated to respond to the funding call. If the investment is made directly with a company, the company might give the investor a drawdown schedule that defines when funds are to be paid over to the company.
Last, if the company succeeds with proper strategic planning and growth, the company pays distributions to the investor, possibly as a form of dividend income, but more frequently in the form of repayments that are made through an investment exit strategy.