Tips on setting up a private equity fund

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It can be quite intimidating for new investors to set up their own private equity fund.  In fact, even those that have been in industry for years understand that the entire process leading to profit can become more complex, longer, and more expensive than expected.  But preparing in advance and keeping to certain key pointers should aid immensely in preventing these hitches, says investment professional Tyler Tysdal. 

It’s all about developing a defined approach or strategy, which begins with knowing if the investment in question is in demand among investors and whether your team can manifest a good track record in it.  A lot of investors nowadays are on the lookout for co-investment options, but you have to know clearly if such will be offered, to whom, and at what cost. 

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Secondly, you have to understand that raising a new fund can take several years, so the initial goal is to have sufficient funds to make it through that period and ensure that your team is on board for the long haul.  Gather a team of like-minded colleagues with clearly assigned roles and who are willing to work for years with one another, as your group’s track record will convince investors of your capability to deliver positive results. 

Keep in mind that your team must be keenly aware of the challenges inherent to the fund-raising process; it can take a plethora of meetings before the influx of initial funds.  Also, consider closely the fund structure: is it going to be corporate, listed, unlisted, or a partnership?  While the investor type often dictates this, it would do you well to keep your investment structure as simple as possible.  Seeking advice from various industry experts at the onset is key, explains Tyler Tysdal.

Private equity and real estate investor Tyler Tysdal began his career in investment banking with Alex Brown & Sons. He graduated from Georgetown University with a BSBA in Finance and obtained his MBA from Harvard Business School. For similar reads, visit this blog.