Private Investment Funds: Introduction

Summary

This practice note will introduce private investment funds, their purpose and benefits, and describe the main types of private investment funds. Private investment funds, such as hedge funds and private equity funds, are popular investment vehicles for sophisticated investors and for investment managers. The principal advantages offered by these funds are that they enable investors to participate in more aggressive investment opportunities with talented investment managers, enable managers to raise capital without the cost and obligations of SEC registration, facilitate incentive compensation of investment managers, and provide customized tax treatment and other aspects of investments to investors and managers. Private investment funds typically are organized as limited partnerships and limited liability companies, but may involve structures that include offshore entities and corporations.