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Fund structures and legal vehicles - Coggle Diagram
Fund structures and legal vehicles
Fund structuring is based upon key factors
The specific transaction objectives to be achieved
The targeted investor base
Accounting considerations
Tax considerations
Regulatory considerations
Commercial considerations
Equity
Funds that invest in stocks (equity Securities)
The investment premise of each fund may be different but the ultimate weighting of investment in stocks will remain
Typically equity funds have been longer term with the intention of capital growth , though dividends have been an important source of total return
Private equity
These are funds that invest in the equity securities and debt of operating companies that are not publicly traded on a stock exchnage
Seek to provide working capital to their target investments to nurture expansion, new product development or restructuring of company's operations, management or ownership
Typically target busineses
Already in distress or those that without clear management are destined to find themselves in distressed positions
That are cash generative and which could stand alone or become the anchor business in a series of acquisitions or other an add-on to other acqusitions
That with capital growth can expand into new markets, new products etc
In need of additional financing through offering mezzanine capital ( a form of junior debt that ranks above the common equity) where it has exhausted traditional lending routes (eg banks)
In need of venture capital
Venture captial
Funds that invest into private companies with a view to financing and managing their growth, improvement etc
Target businesses will typically be those in their infancy but identified as early stage, emerging firms
Typically tended to be those in more innovative areas of trade, such as technology business, whether social media or technology intended for more scientific use
The nature of all these large businesses means that they present a higher risk of failure than other businesses and so a venture capital firm will invest on the basis of high returns in the event of success, ordinarily driven through an exit event such as an initial public offering or merge and acquisition
Real estate
Can include many different types of property for many different purposes, such as residential, office space and commercial property as well as funds investing in care homes or student accommodation etc
Funds purpose may be varied, including constructions (funding the development of the properties), buying and owning property with a view to generating rental income or the sale of property for the purpose of capital appreciation and return. A fund may intend to deal with the real estate through all or a combination of these phases
Infrastructure
Governments face more competition for state funds but increasing demand for public services so have looked to private sources of funding to participate in the building and maintenance of numerous public facilities such as schools, prisons, hospitals and transport infrastructure
A number of infrastructure funds have developed in the wake of that requirement, able to provide funding (whether alone or part of a consortia) and facilities management during the construction and operation of those assets
Due to the long term nature of the assets held, the purpose of infrastructure funds is to provide long term income yield through dividends rather than focusing on capital return though some do retain an objective of returning some capital return at the end of the contract term for those assets with remaining economic lives ahead of them
A number of infrastructure funds exist today with the earlier ones tending to be more focused on typical public infrastructure whilst later funds have developed into areas of renewable energies in recognition of increasing government interest in that area
Estoeric
Generic name for those investment presmises that sit outside of the norm such as litigation funds and forestry funds
As the asset classes are not those long trodden by investment funds, the terms of the investment objective and how investors realise returns tend to be more fluid. As a result the prospective investor base tends to be smaller and somewhat limited to those with an interest in that area or with control over a large fund (institutional investors) who may invest a proportion of monies available to them in most esoteric offerings
An unusual and out of the ordinary asset class for the fund