Private Equity Fund
Private equity is defined as equity invested in private/ unlisted or listed companies through a negotiated process.
It can also be defined as medium, provided for long-term finance to potentially high growth companies (quoted and/ or unquoted), in exchange for an equity stake in the company.
Private Equity is an illiquid asset class and requires a long term commitment. Private equity can be used to develop new products and technologies, to expand working capital, to make acquisitions, or to strengthen a company's balance sheet.
There are various types of Private Equity investments:
- Venture Capital : Primarily for expansion or creation of smaller companies usually in emerging industries
- Buy Out : For acquisition of larger & mature companies with established cash flows
- Special Situations : Equity or Debt capital for financially or operationally distressed companies
- Mezzanine : Intermediate debt capital for the purpose of acquisition
- Growth Capital : Type of investment, most often a minority investment, in relatively mature companies to expand/ restructure/ operations/ enter new markets or finance an acquisition without a change of control of the business
Investment features and considerations:
- Entry requirement is substantially high, as the threshold limit to enter into such schemes is high.
- Limited liquidity because of the long-term, lock-in period
- Investment control
- Unfunded commitments
- Investment risk as these schemes fall under high risk category
- High returns are expected due to high risk nature of the fund
Disclaimer: DBS Bank Ltd. only distributes/refers certain third-party products and services and the same is on a non risk participation basis. The agreement for these products would be solely between the customer and the product provider. The customer shall not hold the Bank responsible for any gains/loss arising from the investments into these products.