Compare private equity funds to hedge funds

Banking & FinanceFinance ManagementGrowth & Empowerment

Private equity term is used when investors use their funds for acquisition of public entities or in investment in private companies whereas hedge funds are privately owned entities that used to raise funds from investors and invest them back in financial instruments.

Private equity funds are used in company acquisition, expansion or to strengthen the balance sheet whereas private equity is used for fundraising.

Private equity

Significant parts of private equity are accredited and institutional investors because they can commit large amounts for a longer period of time. Private equity also converts public companies into private companies.

Hedge funds

Protecting from financial losses is called hedge. Funds used to do such things are called hedge funds. These funds are used as a range of securities because these are not regulated by the Securities and Exchange Commission. These funds can be used as both long term strategies and short term strategies

Differences

The major differences between job costing and contract costing are as follows −

Sr.NoPrivate equity fundsHedge funds
1
These are the funds used by investors for investing in private entities/acquisition entities which are enlisted publicly in the stock exchange.
Private companies raise funds and then reinvest in risky portfolios. These are hedge funds.
2
Long time frame.
Short time frame.
3
Restrictions are applicable for a certain period of time because these are closed end investments.
No restrictions on these because they are open end investments.
4
Have to invest whenever they are called upon.
One-time investment.
5
Less risk.
High level of risk compared to equity private funds.
6
Not subjected to tax rates.
Subjected to taxes.
7
High level of control/influence over assets.
Less level of control/influence over the assets.
8
Defined contractually.
Zero limitation funds life.
9
Hold small stakes.
Held a significant stake.
10
1 -2% management fees for actively managed assets.
1 - 2% management fees for under managed assets.
11
Long term investment horizon.
Investment horizon is short term.
12
Investors will participate actively.
Passive level of participation.

Conclusion

Profit or gains from private equity funds are exempted from taxes where profits or gains from hedge funds are adjusted for taxes.

raja
Published on 05-Jul-2021 13:20:22
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