Institutions and individual investors in PE

– Institutions: pension funds, endowments, and foundations
– Individuals: family offices, high-net-worth individuals

Four ways of investing

  • Direct investing: directly invest in private companies, up to 100% of its share
  • Fund investing: invest in a private equity fund that buys private companies
  • Co-investing: invest in both funds and directly in its portfolio companies
  • Secondary investing: buy and sell existing and future private equity commitments

Co-investing helps investor reduce fee – an example

A company looking for $30M equity investment

Without co-investment

  • The fund gives $30M
  • The investor participates through investing into the fund

With co-investment

  • The fund gives $20M
  • The investor gives $10M, in addition to her investment in the fund
  • The investor invests in the company both directly and indirectly
  • The investor reduces the “two and twenty” fee on the $10M investment

Secondary investing – an example

An investor committing to invest $50M in a private equity fund, with

  • $10~20M upfront investment, and
  • Remaining capital upon capital calls over the next 7~10 years

During the commitment period, the investor could sell through secondaries:

  • Existing deals that the private equity fund was already made
  • Future capital calls

The biggest Canadian investor in PE (2015): Canada Pension Plan Investment Board (CPPIB)

  • Participates in direct, fund investments, co-investments, and secondaries

Free Resource

Private Equity Due Diligence Checklist: 10 Questions Family Offices Should Ask

Download Checklist

Are you a family office looking for private equity consulting?

Visit Mink Capital