Co-invest through a sister - VP@PE
Hello WSO,
My sister works in PE & with a recent promotion as VP she has been offered an option to co-invest. I’d like to invest through her with some of the spare cash I have ($100K initially in lump sum + up to $50K annually afterwards). I’m unsure what’d be the best way to do so while 1) avoiding unnecessary taxes and 2) keeping track of my portion of the pile clearly (in a legally binding way) as it grows over the years. I’ve heard of people who co-invest $5MM+ of family money through one of the family members who work in a PE. But we do not have such money. What would be the best way for me to co-invest through my sister?
Any advice would be much appreciated!
You could set up a trust, that would be the cleanest but has additional set up and ongoing costs.
Thank you franco. One potential issue I see with this route is that I’m not an accredited investor (neither my net worth or salary meet the minimum requirement). If we were to create a trust and get it accredited, don’t we need a minimum of 5 million in net assets or doesn’t each person have to be accredited?
I see. Sounds like you’ll have to come up with a private arrangement.
Keep in mind that for a traditional PE fund you would be making a commitment upfront (your sister will be on the hook for the commitment you make should you “default”). So $100k upfront + $50k p.a. isn’t really the way to think about an investment in PE.
-
Yes, I believe this is standard. Is there no way around it?
I mean - the only way I can think of is to gift her 15K each year (at which point on paper it becomes my sister’s money) and have her co-invest it (off the paper on my behalf)...But I created this posting to see if anyone knows of a better way.
-
Easiest way is to literally give her money to invest for you, no contracts no nada. “Legally binding” - are you planning on suing your sister if things go sideways?
Velit officia fugit assumenda. Aliquid tempora tempora et autem. Enim nemo aut libero praesentium id. Ipsam soluta blanditiis rerum porro iusto labore eos. Inventore incidunt fuga odit enim voluptatem.
Magni sit ut dicta numquam suscipit expedita. Non qui illo nostrum at. Est quidem praesentium nesciunt. Voluptatem maxime culpa aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...