Limited partners are only accountable for losses tied to their individual investment, while general partners handle any additional losses within the fund and liabilities to the broader market.The fund manager should determine provisions related to management fees, carried interest and any hurdle rate for performance.
First, outline your business strategy and differentiate your financial plan from those of competitors and benchmarks.
Establishing a business strategy requires significant research into a defined market or individual sector.
First-time managers are more likely to raise more money if they are part of a team that spins out of a previously successful firm.
On the back end, it's essential to establish in-house operations.
Remember, private equity typically hinges on investment in companies that are not traded on the public market.
It's critical that you determine the purpose of each investment.
As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.
Your investors will be limited partners who don't have the right to decide which companies are part of your fund.
As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.
Today's many successful private equity firms include Blackstone Group, Apollo Management, TPG Capital, Goldman Sachs Capital Partners, and Carlyle Group.