Sunday, February 27, 2011

Private Equity Funding

A Straits Times article again highlighting the allure of private equity. They enticed you with phrases like "Though not easily accessible to the average investor, such funds outperform public equities" . Hmm...where have I heard that before.. it seems to be transplantable to Hedge Funds.

If you want to do private equity, don't need to approach private equity fund via private banks or specialised private equity fund manager. This is like hedge funds. They promised you the skies but ultimately, it benefits them more than you after the fees. I'm sure only the institutional investors and family offices will get more out of private equity via those managers than normal hnws. This is just my view since I have not personally experienced investing in a private equity fund of institutional size.

For example, if you have $500k to spare, why not invest $100k into 5 different local companies of your liking. You could have spoken to a private owner of a ID shop and his business model and management gives you confidence, approach him and ask him whether he is interested in letting in a sleeping partner or an active partner.

How about some assistant chef you know who can cooked very well and you get to know during your meetup with him his intention to start a hawker stall ? Why not be his partner for $100k.

You will be assuming the same risk and illiquidity as the private equity fund but the upside is you are personally involved with the party you are funding.

Even better, how about becoming a private equity fund? Set up a small pte ltd company with like-minded investors. Assuming 5 investors pooled $200k each into the pte ltd company, you could have your diversify your risks again by putting up less upfront (200k each instead of $500k) while increasing your companies invested to 10 ($100k each).

Just my thoughts... I would do that. So any business out there who needs micro-funding? Or how about like-minded investors who want to involve in micro-funding? :)

1 comment:

Rookie said...

Micro-funding? sounds like a gd idea to pull resources together.