All,
I am an associate at a middle market buyout fund that is in the midst of raising a new fund. I have the opportunity to invest in that fund. At first glance, it seems like a no-brainer. Our last few funds have performed well and it beats putting my capital in the market. We are also on track to hitting our hard cap, although it seems to have taken us longer in comparison to other funds.
That being said, I am worried about where we are in the cycle and having my capital tied up for the next ~5 years. I am also worried about the election and the implications that will have on those with these types of investments.
- For those who have been in this situation, what pros / cons have you weighed? What ultimately got you over the "hump"?
- Are there any major questions you had for GPs? Can an individual get the same treatment as a larger LP?
Had the same dilemma. Other things I would consider: 1) Are you putting too many eggs in one basket? If you do have carry as well, your new money, your carry, and your salary are subject to the performance of the fund. 2) What personal cycle are you in? Do you have a big "capex" coming up - could be buying an engagement ring, buying an apt, and etc. 3) I assume they won't charge you the 2% mgmt fees.... 4) I know other funds offer leverage on your investment.
I won't worry too much about the macroeconomic environment since no one has any clues on what events will happen and the impact of those impacts to the market. The good thing is that you are managing (or being part of the team) so you have some control over what's going on in your fund.
I ultimately didn't do it cuz of my diversification concern and it offers your employer too much leverage in terms of negotiation contracts.
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