A private equity fund is defined as an equity capital that is not publicized. Private equity funds come from private sources, including investors and funds that make investments directly into private companies or acquire public companies resulting to the delisting of public equity.
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Meanwhile, a hedge fund is an investment offered to a limited number of bigwigs. The risk involved in this type of investment is in counterbalancing potential losses by way of hedging investments in various approaches, such as short-selling.
Nowadays, small businesses have a rough time obtaining credit, much less acquiring hedge funds and private equities. This may be due to lenders’ tight credit policies or their refusal to take risks on small businesses. Fortunately, crowdsourcing and crowdfunding have become practices that small businesses can take for them to cope with financial struggles, Forbes Magazine explains. These practices avoid traditional capital sources and instead acquire financing from the masses. Because of the plausibility of these practices, Congress passed the Jumpstart Our Business Startups (JOBS) Act in 2012.
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This development eventually results to a liberal access to hedge funds and private equity funds to accredited investors. Although non-accredited investors would not be admitted here, many small businesses can benefit from this. It seems that capital-starved entrepreneurs have more options in gaining investments with less risk.
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Investment expert Alex von Furstenberg served as the co-managing member and chief investment officer of Arrow Capital Management, LLC, a private investment firm focused on global public equities. This Facebook page provides more updates about public and private equity markets.
