Explain the ways of investing privately and the vehicles used, and when each one suits an investor
The idea
The usual structure is a limited partnership. The general partner manages the fund and bears general-partner liability for the partnership (in practice the GP is usually housed in a limited-liability entity), while limited partners commit capital that is called over an investment period, within a fixed, extendable term. Investors can hold fund interests as LPs, or use funds of funds, which add diversification and access for smaller investors at the cost of a second fee layer. They can also co-invest beside a GP at low or zero fees, invest directly, which needs in-house deal teams, or buy secondaries, which shorten the J-curve and give sellers liquidity. The right choice depends on the client's size, expertise, fee budget and need for control. The trap: co-investment offers often need quick decisions and may suffer adverse selection.
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