Search funds are a type of investment that is used to raise money for private equity purchases. This type of fund has been in existence since 1984 and has grown in popularity. These funds are available to private investors. Generally, in order to get involved with these types of funds, you have to be very wealthy and have a large amount of money to invest. The fund manager is typically an entrepreneur that sets out to raise a large amount of money from investors. The money from the investors is pooled together so that the fund can use the money to invest. 

Private Equity Investment

The primary reason for search funds is to get involved with private equity investments. Private equity investing is a type of investing that allows individuals to purchase existing companies. Sometimes, the companies that are purchased are publicly held companies and the goal of the search fund is to take the company private. This involves taking the company off of the stock market and changing certain aspects of it.

Many times, the goal of the search fund is to take over a company that is not being managed well and change the policies of the company. By putting competent managers in charge of the company, the search fund hopes to make the company more profitable. After turning things around, the search fund may decide to sell the company. In some cases, this is done by taking the company public again. Through an initial public offering, the company can potentially bring in large amounts of money from investors. 

If the company is too small to go public, the search fund may attempt to sell the company to another investor. At that point, the investors in search fund will receive a return on their investment.

Prestigious Investors

This type of investment vehicle was first created by a professor at Stanford University. In most cases, the money for search funds has been raised from networks of alumni from prestigious universities. The wealthy alumni will invest in these types of funds because they have excess money to invest. In order to profit from this type of investment, you have to be able to set aside a large amount of money, for an extended period of time. In many cases, there are no profits for many months, or years. However, when the profit is finally generated, it can be substantial.

Search Fund Managers

The role of manager in the search fund is extremely important. The manager has to be able to convince investors to put money into the fund. The manager also has to choose the right individuals to be in charge of the companies once they are purchased by the search fund. It is crucial that the fund manager be well-versed in a number of areas in order for the search fund to be successful.

blog comments powered by Disqus
Scottrade