• Investing in Private Equity - Advantages and Drawbacks


    Essays2 Economics

Published: 15.12.2003.
Language: English
Level: College/University
Literature: n/a
References: Not used
  • Essays 'Investing in Private Equity - Advantages and Drawbacks', 1.
  • Essays 'Investing in Private Equity - Advantages and Drawbacks', 2.

The main reason why people invest in private equity is that investment in PE can provide very high profit after exit. As it is in business- high profit is always connected with very high risk- the same is in private equity (PE) market.
If someone is thinking about going into investment business, of course there is need for lots of money, lets look on this essay as potential investors with financial resources- money.
Good alternative of PE investment is public stock markets, lots of companies and great part of them predictable and stable. Trades every day, every minute, lots of buyers and sellers, but is only one big difference- mostly you will own only stocks. Management is independent from you, you have no power in company, can’t make any decisions, of course you can sell your stocks. In opposite, owner of PE provides also management of company that can be very important in young firms without experience. Second great advantage which is directly connected with previous is that you as a possible manager and owner of the company can take much closer and deeper look in the company than any other do. Easily analyze their business partners, strategy, cash flow and predict future possibilities- growth potential. Actually, growth potential is the most important financial information and also shows future’s price of company.
If we compare profit that can bring investment in private equity and profit from traditional investments there are no doubts that PE looks much attractive than traditional investments. As we know there are two steps of risk levels:
1) venture capital,
2) non venture capital.

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