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Today's many successful private equity firms include Blackstone Group, Apollo Management, TPG Capital, Goldman Sachs Capital Partners, and Carlyle Group.However, most firms are small to mid-size shops and can range from just two employees to several hundred workers.
Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor's 500 over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors.
As demand continues to swell for alternative investments in the private equity space, new managers will need to emerge and provide investors with new opportunities to generate alpha.
On the back end, it's essential to establish in-house operations.
These tasks include the rent or purchase office space, furniture, technology requirements, and hiring staff.
It's critical that you determine the purpose of each investment.
For example, is the aim of the investment to grow capital for mergers and acquisitions activity?Or is the goal to raise capital that will allow existing owners to sell their positions in the firm?The second step is to write a business plan, which calculates cash flow expectations, establishes your private equity fund's timeline, including the period to raise capital and exit from portfolio investments.Another important step is to establish the firm and fund name.Additionally, the manager must decide on the roles and titles of the firm's leaders, such as the role of partner or portfolio manager.So, for every million the fund raises from investors, the manager will collect 0,000 in management fees annually.However, fund managers with less experience may receive a smaller management fee to attract new capital.In the United States, a fund typically assumes the structure of a limited partnership or a limited liability firm.As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.Ultimately, investors want to know more about your fund's goals.As you articulate your investment strategy, consider whether you will have a geographic focus.