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Private Equity Investing

3,416 Views | 26 Replies | Last: 9 mo ago by Comeby!
LMCane
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9:57a, 2/6/24
seems that this is where REAL wealth is created.

who has experience with this, and what's the best way to start building a position in private equity?
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Casey TableTennis
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10:55a, 2/6/24
AG
The hardest part here is deal sizing. It takes 6-10 private equity funds to reach an evergreen status where your calls and distributions are close (or somewhat positive). Getting to 6-10 funds and managing the capital call schedule takes 4-8 years. If the kinds of deals you can get into require $X, you will likely need to have invested 4x to 8x to get into 6-10 deals.

Whatever that amount is should be small enough it isn't compromising liquidity plans. So maybe 20% of your liquid wealth by end of the 5 year call cycle.

Deals with better terms or better track records come with higher minimums, moving the totals all higher.

If the math doesn't work to do the above plan you will not have a fully diversified private equity sleeve and be hoping to get a bit lucky on the ones you choose. Some then choose a more diversified offering to mitigate some risk, or lean into a specific stage, geography, or sector.
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TxAg20
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11:50a, 2/6/24
AG
To get in, start asking your peers what their family office is investing in and ask them to introduce you to their contacts at those companies.

Minimums are typically $250,000 to $1 million.

I wouldn't say REAL wealth is created in private equity. Wealth is subjective, but I would say you need real wealth (>$25 million investable) to put together a good PE investment portfolio.
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Diggity
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2:03p, 2/6/24
AG
If you have to ask...
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Cyp0111
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2:05p, 2/6/24
I think there is a lot of recency bias to this specifically on the REPE focused entities. A lot of zeros or close to that out there coming.

I agree with CTB, you need to have a plan for how much liquidity you can allocate to this and make sure you keep capital in reserve for those pesky capital calls. I would say most deals are $50K minimum but see a lot of other stuff higher. I would also say that doing due dillgience on the industry you're going to take a levered bet on is good due dilligence.


I read something that hit home. In some REPE deals, the LPs are simply financing the premium of a call option for the GPs. Think about that one for a minute.

In my experience, my best outcomes have been when the GPs and LPs are heavily aligned.
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LMCane
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2:34p, 2/6/24
I would be most interested in $50K investments being an accredited investor.

on the other hand, seems it is not a guarantee to even make back the principal in doing these deals.

I'm just looking for additional investments open to accredited investors which the majority of citizens have no access to

Bank of America wealth manager was trying to get me to sign up with them, but not sure they have any type of expertise in the area.

anyone use a Bank to get them into additional investment opportunities?
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Cyp0111
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In reply to LMCane • 2:53p, 2/6/24
The Bank of America route probably has significant promote on two layers plus the 1%+ your advisor is taking from you.
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TxAg20
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In reply to LMCane • 4:23p, 2/6/24
AG
LMCane said:

I'm just looking for additional investments open to accredited investors which the majority of citizens have no access to

Do you have a contact at Ray J, Merrill, or Goldman? If so, ask them about "alternatives". These are funds that land somewhere between public markets and private equity, both in minimum size and liquidity.
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1939
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In reply to Cyp0111 • 4:32p, 2/6/24
AG
Cyp0111 said:
The Bank of America route probably has significant promote on two layers plus the 1%+ your advisor is taking from you.
Is a promote not standard on PE deals? I come from the real estate world and a multiple layer promote is standard for a managing member.
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Casey TableTennis
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In reply to 1939 • 5:31p, 2/6/24
AG
1939 said:
Cyp0111 said:
The Bank of America route probably has significant promote on two layers plus the 1%+ your advisor is taking from you.
Is a promote not standard on PE deals? I come from the real estate world and a multiple layer promote is standard for a managing member.


More commonly referred to as carried interest, but yes it is standard. 2/20 used to be standard. There has been compression, it some very successful track records or sexy newer provides still kick at 2/20 with no pref to LP.

You also want to see some of: high water marks, prefs, lower than 2/20, maybe the mgmt fee (the "2") be limited in some way like only on called not committed amounts, etc…

It can be a little counter-intuitive but too good of terms for the LP is a very bad sign to me. If a fund can't raise capital with attractive terms, what is everyone else seeing that I'm not…
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Medaggie
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5:35p, 2/6/24
Ask Around, there are many people with access to accredited only investments.

Minimum is typically 50K.

Key points is to know the operator and their history. Its an operator's game, more important than the investment.

I have slowly moved about 25% of assets to accredited investments.
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CPDAggie10
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9:42p, 2/6/24
AG
I am certainly no big fish at all, but I made a commitment in 2018 that I would try to get into as many private deals as possible…mainly focused in real estate, but I'm also in some other [weird]stuff ranging from bitcoin mines, Womens bathing suits and oil and gas deals.

One thing I have learned is that there are plenty of deals out there, you just have to keep your ear to the ground and never be afraid to ask around and network.

Also, I think some people get spooked by the 'minimum' investment amounts. I can't say how many times I've been told it's a $100k minimum and I've asked hey can I come in 25 or 50 on this one…and they say absolutely that is not a problem.

It also helps if you have other potential investors that you can bring in/introduce to whoever is putting together the deal. That helps on the networking front resulting in more deals coming to you.

Again, no big fish here but wanted to shed some light from my experiences. I will be a big fish one day….
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LMCane
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11:28a, 2/7/24
There is definitely a special hidden language to all of this-

are there any books or websites or Youtubes which you have found helpful in becoming more expert in this field?

I do have one good buddy from Air Force Officer School who made his fortune in developing land plots in DC and turning them into condos

he is all about private equity deals but now is the CEO for a private jet company out of Manassas. He told me to get back in touch on this once I was ready to file paperwork for accredited investor status.
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TxAg20
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12:29p, 2/7/24
AG
You don't have to "file paperwork for accredited investor status." You just warrant that you are an accredited investor and check which box you qualify as an accredited investor as in the subscription docs for each deal or fund.
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MAS444
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In reply to TxAg20 • 4:10p, 2/7/24
AG
Quote:
You don't have to "file paperwork for accredited investor status."
It seems that this has been explained to OP over and over again...
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Ag06Law
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8:31a, 2/8/24
AG
I've never seen one person so obsessed with accredited investor status. I reached it years ago, and you know what I changed? Not a damn thing.
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LMCane
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In reply to MAS444 • 10:00a, 2/8/24
MAS444 said:
Quote:
You don't have to "file paperwork for accredited investor status."
It seems that this has been explained to OP over and over again...
well you are incorrect because I was just at Bank of America and they were having me fill out paperwork
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MAS444
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In reply to LMCane • 10:33a, 2/8/24
AG
Quote:
Quote:
Quote:
Quote:
You don't have to "file paperwork for accredited investor status."
MAS444 said:
It seems that this has been explained to OP over and over again...
well you are incorrect because I was just at Bank of America and they were having me fill out paperwork
Sounds like you're doing it wrong.
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TxAg20
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In reply to LMCane • 7:56p, 2/8/24
AG
LMCane said:
MAS444 said:
Quote:
You don't have to "file paperwork for accredited investor status."
It seems that this has been explained to OP over and over again...
well you are incorrect because I was just at Bank of America and they were having me fill out paperwork


I guess you better make sure they give you an "accredited investor" card! Keep it in your safe next to your Accelerated Reader Reading License to make sure it doesn't get misplaced!
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Comeby!
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In reply to LMCane • 8:46p, 2/8/24
AG
You filled out KYC paperwork. That's different.
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Casey TableTennis
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10:10p, 2/8/24
AG
I had a post deleted that literally only said "consider me now beknownst or ununbeknownst".

Not a vindictive person, but about to flag every post from here out by OP for trolling just for kicks.
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Scud Runner
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In reply to LMCane • 9:13a, 2/9/24
I'm going to need to see your Accredited Investor badge.
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Apache
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3:10p, 2/9/24
AG
Quote:
once I was ready to file paperwork for accredited investor status.
If I was an Accredited Investor, I wouldn't mess with Private Equity Funds.... Hedge Funds is the way to go.
Ask around Bank of America (privately) & they'll tell you the same.
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YouBet
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7:55p, 2/9/24
AG
The MFB vibes are strong.
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Medaggie
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8:48p, 2/9/24
I have invested in many accredited only investments and have funded a few. Passive investors only "check' the box and never have to prove it. It is essentially to appease the SEC to show that the investor understands this could be speculative.
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Ag06Law
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In reply to Medaggie • 10:44p, 2/9/24
AG
Medaggie said:
I have invested in many accredited only investments and have funded a few. Passive investors only "check' the box and never have to prove it. It is essentially to appease the SEC to show that the investor understands this could be speculative.


And has sufficient means to not end up on the street if the investment doesn't pan out.
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Comeby!
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In reply to Ag06Law • 1:25a, 2/10/24
AG

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