Thursday, July 21, 2016

Douglas Battista Explains Private Equity Investments

Douglas Battista
Private equity, according to Douglas Battista, is money available to private businesses to help with expenses related to product development, acquisition, or expansion or to simply strengthen balance sheets or provide working capital. Here, Battista explains why private equity is often considered a sound investment.

Q: What are the benefits of investing in private equity?

Douglas Battista: Historically, private equity funds have offered both short- and long-term returns that far outweigh traditional stock investments. Private equity investments often have up to a 22% ROI whereas a traditional investment may max out at 10% or less.

Q: Who can invest in a private equity fund?

Douglas Battista: Private equity funds are not for the “everyday” investor. Most fund managers expect a minimum $250,000 investment and may require a net worth of $5 million or more. It is not unusual for large universities, family trusts, and pension plan managers to put money into private equity accounts.

Q: What types of companies seek private equity?

Douglas Battista: While any business can apply for private equity, most investors tend to consider software, healthcare, biotechnology, and telecommunications first. These are business niches often identified to have the best potential for significant growth within a relatively short period of time. Some of the most well-known companies in the world have benefited from private equity funds, including FedEx, Cisco Systems, and A&W Restaurants.

Q: I don’t have $250,000 available to invest. Do I still have private equity options?

Douglas Battista: A fund of funds or private equity exchange traded fund may be an option for investors with as little as $100,000. A fund of funds is essentially a pool of money made possible by numerous private partnerships. A private equity EFT is an option for those that don’t want to worry about minimum investment requirements. Both options, however, are subject to more fees and expenditures and thus a smaller profit margin than traditional private equity funding.