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Can you invest in a private equity/VC fund?
Old 01-09-2007, 05:27 PM   #1
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Can you invest in a private equity/VC fund?

Does anyone know if there is such a way of investing something into this particular asset class, like maybe a closed-end fund or something? I believe this is an area that many hedge funds play so wondered if there was a public way of getting access if you can't make the SEC requirements for investing in a hedge fund.


Thanks!
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Re: Can you invest in a private equity/VC fund?
Old 01-09-2007, 08:19 PM   #2
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Re: Can you invest in a private equity/VC fund?

VC funds are available to few investors. I have a family member in the industry and can't participate.

First an investor needs to be able to commit substantial $,$$$,$$$ over an extended period, and to deliver on that commitment at the drop of a hat.

Because VC managers are busy developing the businesses they have little time to hold the hands of their investors.

The firms they are developing often have very closely held business plans - not suitable for 'sunshine' disclosure (which is why some public pension plans are closed out).

Not all funds are winners. They are a form of a closed end fund. They disburse irregularly in either $ or stock.

Lastly, these funds have a lot of overhead, aka expenses ("carry" as they say in the industry).

Oh, I should add that having substantial net worth is not enough. If an investor is high maintenance (write your own definition) they don't get in. Sometimes, even in investing, being nice has value.

(edited for typo)
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Re: Can you invest in a private equity/VC fund?
Old 01-09-2007, 08:25 PM   #3
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Re: Can you invest in a private equity/VC fund?

Am I the only one who remembers MeVC, the "venture capital for the rest of us" IPO of 1999?

It didn't work out too well.
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Re: Can you invest in a private equity/VC fund?
Old 01-09-2007, 08:38 PM   #4
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Re: Can you invest in a private equity/VC fund?

You may want to take a look at some of the Buisiness development companies as a low cost way to gain at least some exposure to private equity/mezzanine debt type investments. They trade on the regular exchanges like as a stock. You can find a list of all publicly traded BDCs on QuantumOnline.com.

Two that might be a good place to start looking are Allied Capital (ALD) and American capital strategies (ACAS). Both of these companies provide funding to small/ mid size companies by either loaning money and/or taking an equity position in the companies. Due to tax laws BDCs pass most of their income to the stockholders as dividends (sort of like REITs do). Do your homework, both ACAS and ALD have excellent web pages that will show you the companies that they have placed money with currently. Because they pass a lot of their earnings through, you have to be aware that they will issue new stock to fund expansion.

full disclosure- I have had a position in ACAS for a number of years

Also, IIRC one of ETF companies was supposed to launch a private equity ETF. I saw that as a headline somewhere a while ago, but I have never bothered to look for it.
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Re: Can you invest in a private equity/VC fund?
Old 01-10-2007, 06:48 AM   #5
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Re: Can you invest in a private equity/VC fund?

Unless you have serious megabucks, I would direct your efforts into looking at the BDCs.
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