The Basics of Private Equity

As Vice President/Investments with The CR Wealth Management Group of Stifel, Toby Mitchell leverages the knowledge he gained working as a financial advisor with Morgan Stanley and more than a decade functioning in the credit sector. From Stifel's offices in New York, Toby offers a broad range of investment services to clients to help them preserve and grow wealth.

Among the investment options The CR Wealth Management Group offers is private equity. A form of capital that does not get recorded on any public exchange, private equity involves direct investment into private companies from individuals or specially created funds. Typically, private companies utilize these funds to purchase new technologies, create working capital, or make acquisitions to bolster the company’s offerings.

Typically used as a medium- to long-term strategy, private equity investment is primarily made in mature companies, with investors receiving an equity stake in the private company in return for the investment. In many cases, private equity investors will work alongside the management teams of the companies they invest in, providing the benefits of their own expertise to facilitate sustainable growth.

Private equity funds are not appropriate for all investors. Investors should be aware that private equity funds may contain speculative investment practices that can lead to a loss of the entire investment. Private equity funds may invest in entities in which no secondary market exists and, as such, may be highly illiquid. The funds are not required to provide periodic pricing or valuation information to investors and often charge high fees that can erode performance. Additionally, they may involve complex tax structures and delays in distributing tax information.