According to U.S. securities law, only accredited investors may invest in private equity, venture capital, hedge funds, and private placements. Regulation D, Rule 501 of the Securities Act of 1933 states the accredited investor definition as: (a) an individual (or married couple) whose (joint) net worth exceeds $1 million, excluding the value of the primary residence; or
Individuals invest in tangible assets (also called hard assets) because they are generally considered more stable in value than most commonly traded sovereign currencies and securities. When the world economy falters, many investors move into tangible assets, such as gold, because they are perceived as safe havens during difficult economic times.
A venture capital fund is a professionally managed pool of capital that is raised from public and private pension funds, endowments, foundations, banks, insurance companies, corporations, and wealthy families and individuals. Venture capitalists (VCs) generally invest in companies with high growth potential that have a realistic exit scenario within five to seven years.
Private equity and venture capital firms invest in different companies and for different reasons. In simplest terms, private equity firms invest money into private companies.* Venture capital can be viewed as a segment of private equity, at least from an academic point of view.
In the world of middle-market buyouts, non-traditional funds (or fund-like groups) are playing an increasingly active role in the private equity domain. They include fundless sponsors, family offices, and even limited partners making direct investments in businesses. In this article, we will explore differences between fundless sponsors and more traditionally structured private equity funds.