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Isn’t there also a component that PE is incentivized to work for existing investors more than new investors. If they mark down an asset in a bear market and a n
by jholdn 4y ago
Isn’t there also a component that PE is incentivized to work for existing investors more than new investors. If they mark down an asset in a bear market and a new investor puts money in they will potentially dilute future profits for existing investors by possibly letting them in at a lower price. If the market recovers, the new investor sees all those gains. If the asset isn’t marked down, those gains are shared with existing investors (b/c the new investor had to pay above market).
- snake_doc 4y agoThe majority of private equity (incl. VC funds) funds are close-ended by definition [1]. Once the fundraising completes for a fund, no “new” money is allowed into the fund. New investors can invest with a PE firms in 2 ways: invest in a new fund, or purchase shares of an existing fund on the small secondaries market [2]. So no, in most cases PE portfolio managers are not going to track “new” vs “existing” money within a fund. There are exceptions, ie there are PE asset classes that are open-ended (ie. The infamous Blackstone REIT [3]). Open ended funds are more common for public equity hedge funds. [1] https://www.investor.gov/introduction-investing/investing-basics/investment-products/private-investment-funds/private-equity https://www.investor.gov/introduction-investing/investing-ba... [2] https://www.institutionalinvestor.com/article/b1zspcywbpn2h7/Here-s-How-the-Small-and-Inefficient-Secondary-Market-Will-Grow https://www.institutionalinvestor.com/article/b1zspcywbpn2h7... [3] https://on.ft.com/3Zc7Wku https://on.ft.com/3Zc7Wku