Features
Considerations for investing in private equity real estate funds relative to other forms of investment include:
- Substantial entry costs, with most funds requiring significant initial investment (usually upwards of $1,000,000) plus further investment for the first few years of the fund.
- Investments in limited partnership interests (which is the dominant legal form of private equity real estate funds) are referred to as "illiquid" investments which should earn a premium over traditional securities, such as stocks and bonds. Once invested, it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as twelve years. Distributions are made only as investments are converted to cash; limited partners typically have no right to demand that sales be made.
- If a private equity real estate firm can't find suitable investment opportunities, it will not draw on an investor's commitment. Given the risks associated with private equity real estate investments, an investor can lose all of its investment if the fund performs badly.
For the above mentioned reasons, private equity fund investment is for those who can afford to have their capital locked in for long periods of time and who are able to risk losing significant amounts of money. This is balanced by the potential benefits of annual returns, which are often excess of 20% for successful opportunistic funds. Investors in private equity real estate funds tend, therefore, to be institutional investors or high net worth individuals.
Read more about this topic: Private Equity Real Estate
Famous quotes containing the word features:
“Each reader discovers for himself that, with respect to the simpler features of nature, succeeding poets have done little else than copy his similes.”
—Henry David Thoreau (1817–1862)
“However much we may differ in the choice of the measures which should guide the administration of the government, there can be but little doubt in the minds of those who are really friendly to the republican features of our system that one of its most important securities consists in the separation of the legislative and executive powers at the same time that each is acknowledged to be supreme, in the will of the people constitutionally expressed.”
—Andrew Jackson (1767–1845)
“These, then, will be some of the features of democracy ... it will be, in all likelihood, an agreeable, lawless, particolored commonwealth, dealing with all alike on a footing of equality, whether they be really equal or not.”
—Plato (c. 427–347 B.C.)