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Chapter 10. Venture Capital Funds > Private Equity Funds and Venture Capital Fu...

Private Equity Funds and Venture Capital Funds

Introduction

Venture capital funds are an important segment of the private equity fund sector which invests in the equity of private businesses and the securities of public companies. The financial activities of private equity funds are spread over a variety of fields, including derivatives, real estate, commodities, and emerging markets. Conservative estimates indicate that more than $100 billion are invested annually by private equity funds registered in the United States. While the numbers declined sharply in 2001, they are still above the amount in the years prior to 1999. It is important to point out that the figures are only approximates, since funds are not subject to public disclosure requirements with respect to their private equity investments. Some funds may choose to publish their investments and size in order to demonstrate their own financial ability and to enhance their own ability to raise capital, and gain access to attractive investments. Other funds, on the other hand, prefer to stay away from the limelight.

Private equity funds usually have a pre-defined model of their field of investment. For instance, many funds specialize in investing in companies which are experiencing financial difficulties by buying the securities of such companies (distressed securities); various hedge funds invest in securities, commodities, and/or currencies, often through financial leverage (i.e., using debt to “leverage” the equity).


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