Low net-worth professionals are pooling together funds so that they may tap into the high returns seen from private equity funds.
Amateur investors are forming their own small private equity funds. This is in response to the fact that in 2018, private equity funds have had a return of 10 percent. This has beat other public equity indexes.
These smaller funds usually have assets up in the range of $1 million. This means that amateur investors will be able to look over deals that are often passed over by traditionally larger private equity funds.
Smaller funds that are successful usually leverage the professional networks of investors to find investment opportunities. Additionally, investors in the funds usually have expertise within their professional industry. This is in contrast to the large team of analysts that large private equity firms have, whose work helps inform whether an investment is made or not.
Private equity is unique, because once an investment is made, there is little opportunity to back out. Investors in private equity only get a return on their investment if the company goes public or if it is bought out. However, investors in public equity can sell shares whenever they want.
These small private equity funds are high risk with little evidence of consistent returns.