ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Investing in Stocks, Bonds, Real Estate, More

Six Secrets of Private Equity Investing

Updated on January 28, 2011

Six Items To Consider

When investing in private equity, there are six key factors or secrets to consider to finding successful and more importantly, profitable private equity deals.

Secret #1- Find the Best Deals by Being in the Right Places

By establishing themselves as authorities in the private investing space and being in the places where great entrepreneurs congregate (online, at events, etc.), shrewd individuals and investors become privy to special situation investment opportunities that the general public doesn't hear about until much later.

Secret #2- Determine if the Firm or Project Is Solid

Before considering an investment in any private equity firm or project, it is critical to ensure that the projections are sound. Regardless of how "whiz-bang" the project appears to be, when performing due diligence on the project, astute investors require that the following three conditions are met:

1. There is a large and growing market for the type of project

2. The project has a viable exit strategy

3. The project has presented realistic financial assumptions

Secret #3—Assess Whether the Management Team Will Execute

A strong management team is almost always a sign of a strong business opportunity.  If the opportunity wasn't solid, then these talented individuals would be smart enough to focus their energies elsewhere.

Secret #4—Understand the Exit Strategy

Investors in private equity firms reap rewards when the projects in which they invest have an "exit strategy" or "liquidity event" which primarily consists of a project being sold or refinanced. At this point (or soon thereafter if a holding period exists), investors reap financial windfalls from the event.

Secret #5—Conduct Due Diligence

Investors in private equity firms should always look at the investments of the fund to determine if it is right for them. Review the company’s business plan to make sure that your investing goals are in line with the goals of the fund. If the fund invests in real estate and you are more comfortable in Treasuries, the fund may not be for you.

Secret #6—Diversify Your Private Company Portfolio

How many times have you heard someone say, "Don't put all your eggs in one basket"? When it comes to any kind of investing, this is very good advice.  Successful investors know that diversifying their investments can help reduce the impact that a single, poorly performing investment can make on their overall portfolio, or mix of investments. This is particularly true with private company investing. Private equity investing is inherently variable -- with a relatively small percentage of companies building themselves to successful exits and investment harvesting.  Most individual investors in private equity significantly under-diversify their portfolios -- investing in one or only a handful of companies and thereby greatly increasing their risk profile.

If you keep these six items in mind, not only will you find successful private equity deals, but you will also avoid the bad and non-profitable deals.  Happy Hunting!

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: "https://hubpages.com/privacy-policy#gdpr"

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)