Private equity investing provides investors an opportunity to increase returns and lower risks. Based on historical market assumptions, private equity has the potential to achieve higher returns than could be achieved investing in other asset classes. Private equity investing also provides access to a new universe of companies not available through the public markets. In addition, adding private equity to a portfolio adds a layer of diversification that may reduce overall risk.
Private Equity Fund-of-Funds
Private equity funds-of-funds pool the assets of multiple participants and invest in diversified portfolios of private equity funds. These funds-of-funds usually aim to commit to top tier and boutique private equity funds, including both buyout and venture capital funds. Each private equity fund, in turn, invests in privately held companies typically dispersed by geography, industry, and stage of development.
Investors in funds-of-funds enjoy broader diversification than could be attained through a single manager or fund. Funds-of-funds also offer reduced administrative burdens for investors by providing consolidated reporting and capital calls.
Northern Trust's private equity funds-of-funds historically have been available to both taxable and tax-exempt investors that are accredited or qualified. Investments in private equity funds are subject to private placement fund rules. Individuals must have a net worth greater than $1.5 million and entities must have investments greater than $5.0 million.
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