Investing in Private Equity

You should be an accredited investor as you have net worth, excluding your primary residence, of over $1m. https://www.sec.gov/files/ib_accreditedinvestors.pdf

PE groups will have a minimum investment requirement, which you might not meet. Your best bet might be to just reach out to the investor inquiries email for various investment groups. While you may strike out with the well known funds, if you're in a major city there will be smaller groups that cater to individual investors and as such will have lower minimum investments.

Gosh, why not do something interesting? Go buy a company on all leverage knowing you have cash at home if things don't work out. Go buy a heliski operation. What's your day job? You've got the fckn golden ticket and you're trying to achieve a boring ass lp position? ugh

If it were my money, I'd focus on RE. IMO you can get a decent range of levered and unleavened returns, clip a great current yield to maintain a comfortable lifestyle, while maintaining ownership of hard assets. I wouldn't waste my time with any sort of FoFs, it's a dying asset class. I also wouldn't waste my time trying to be a direct LP. With that little money, you're looking at small (risky) lower MM PE, not to mention your money is locked up for almost a decade and why would you want to be an LP when you can exert more control over your own investments without too much brain damage in RE. Note - I don't even work in RE so this isn't an endorsement, just what I would do.

find a wealth manager that you can trust and give him $1mm+ to manage and just forget about it. Don't put half your $2mm inheritance into one f*cking asset class. Actually, if you just tossed $1mm into a 30-year treasury, you could give yourself a ~$50k annual pre-tax salary for the next 30 years for doing nothing.

As others have said, you just got a golden ticket - there are so many better things you can be spending your time thinking about.

The asset manager I work for has a pretty famous FoF business. It varies by Fund, but we have some that have mutual-class type shares with monthly liquidity (mainly invested in short-term funds) and then FoF's with 25% gates per quarter and 90 day notice, which essentially means around a year or so to get your money back. The smallest minimum investment in of our mutual-type fund types is $10,000 (it has a lot of capital in it), while we tailor bespoke options for clients willing to invest $20mm to $50mm minimum (also has to be an indication that the money will grow).

I haven't actually worked on our PE FoF(s); but I would recommend looking into a financial advisor that can hook you into HNW distribution platforms, which offer FoF type products and manager selection. Goldman Sachs' AIMS is a good example - it's an investment management division that evaluates other managers. JP Morgan likely has a similar alternative. You might have some difficulty because you are at the very bottom of HNW if at all; but an aggressive financial advisor might hook you up.

Also, FoF is a dying business. In a era of lowering fees, it's very hard to justify fees on top of fees. Keep that in mind as the underlying returns will have to be very strong.

To invest in PE, often the minimum requirement is to become an accredited investor. Next, in order to gain access to most funds, you may want to poke around and let people working in the PE world know that you're willing to invest at least 1 million USD. Once a firm open's their doors, you're game. Also you'll have to do your research on whether fund gains are not offset by taxes. FoF usually aren't the best option for this.

I received a windfall of close to $5 million when I sold my startup. I invested 1m USD in my current firm's own fund, invested another 1m USD in a high volatility HF (where the requirement was 1 m USD minimum, invested 1m USD in a value-investing HF, and the rest parked away in various tax havens, which I can summon up when I feel like starting up again.

Do not go for the big banks! You're HNW is too low for them to treat you seriously as a client. Besides you're way below the threshold of these banks - JPM requires $20 million, I think. I personally use a Swiss private bank myself (Pictet/Lombard Odier/Julius Baer/Vontobel, etc.)

Agree with many of the points made above however there are some other options for accessing PE; unfortunately there are restrictions for US citizens on these investments that you may need to circumnavigate, but an option nonetheless.

There are several closed-ended investment trusts listed on the LSE which offer access to a PE FoF portfolio, as well as some direct investment exposure. These vehicles are typically established either to offer PE firms access to a proprietary capital source which they can cornerstone their fundraising with (Apax Global Alpha, HG Capital Trust, ICG Enterprise Trust, Electra Private Equity) or to allow retail investors access to a restricted asset class with liquidity provided by virtue of the exchange traded nature of the vehicles (Standard Life PE, F&C PE Trust, Princess Private Equity).

These companies are all strong performers in terms of NAV growth and provide a healthy dividend (c6%) usually on a quarterly basis.

Don't do that. Invest in RE instead, with 2 mil, you should be able to get annual cash flows (minimal taxes) between 200k-300k. You're set for life, don't be greedy about it; I don't say this with moral high ground bs, but that could certainly cause you to bleed assets if you're not careful versus these guaranteed, safe returns

I had a similar situation happen to me a number of years ago. Was fortunate to have smart family members and great co-workers/mentors to help me make smart decision. If you would like to discuss feel free to PM me.

you coming here for free advice? gfyo

You actually got people to advertise their firms on WSO. Respect

Investing half of your net worth into 1 fund is far too risky and is a terrible idea.

nobody urges you to invest the money now. just keep it on the bank for a while, find a job which makes you happy. in some few years invest your money peu un peu in different assets such as RE, ETS, whatever. i would be very careful with investing in fof esp as your profiles mentions intern. get some investment experience (through working) and you would be wiser in investing

You're a millionaire on paper, which ought be sufficient to pass the accredited investor hurdle I believe. Of course, any sort of investment of this nature should be undertaken with competent legal counsel.

The issue you're really going to contend with is that the world is awash in money thanks to years of easy interest rates, and you'll be competing with other people for the limited number of seats that a PE fund has to offer. PE as an asset class, among established managers, is like a game of musical chairs in that a limited number of spots are earmarked for the most strategically important prospective LPs. For someone like you, you are going to be picked last in the lineup, if at all, with reasoning below:

In any PE fund worth its salt, the small number of ~$2mm positions available are given to FoF managers. Any investing on the $1-5mm scale done by individuals and their trusts tends to be done by "Friends and Family" - think the managers' sons' trust, or the trust of the CEO of one of their portfolio companies. It is relatively rare to see a commitment like yours materializing.

You've got to consider this: to any manager worth his salt, their fund is oversubscribed. They're not eager to sop up more money, they're trying to figure out which prospective LPs to admit to the fund, and which LPs to turn away. What's the benefit of giving a seat to some rando like you with no potential for upside, when they could instead give the $2mm seat to a new FoF manager that may someday grow into a $30mm investor? Or give it to the CEO of one of the companies they just bought?

You are (justifiably) unaware of the calculus underlying LP admissions, however the business of deciding who to accept as an LP is just as political as any other calculation made by humans. Fact of the matter is that you are an outsider trying to invest a paltry sum, competing with others who have either the potential to become a strategically valuable relationship to any potential manager, or with others who are already buddy buddy with the manager. This is to ignore the broader point that ALL of the $1-10m investors are of a different category of importance than large, institutional managers, all of whom the managers of the world are eager to curry favor with.

As others have noted, $2mm will put you dead last at the bargaining table when it comes to negotiating the terms of your investment. Further, any returns you hope to get on your investment would likely be frittered away on the legal fees required up front by any competent lawyer, who would be responsible for negotiating the terms of your investment.

I would not enter such a structured and zero-sum game as the internal politics of LBOs if I were in your position, unless you are personally involved somehow with the manager, and can therefore trust that they'll advocate your best interests.

Further, I would be skeptical of any manager that seems eager to take your $2mm. Remember this: before any interests are offered, the manager knows how much money he's targeting for his fund. Anyone who is eager to sop up a $2mm commitment from an unheard of investor is either extremely greedy, or lacks market interest in his "investment expertise". Either quality would make me wary.

Wouldn't advise putting that much of your NW into one asset class, typical PE allocation is

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Private Equity and other alternative investments are one of the most attractive asset classes for HNW individuals. As mentioned in some of the comments, to invest in the best performing Private Equity funds you need far more than US$2 million to access such investments. In your case you will be able to invest in mid-cap PE funds and if you do not know anyone in the fund manager you might get worse terms than the other bigger investors sitting at the table. Furthermore you won't be able to differentiate your portfolio within alternatives. However, to tackle this issue, a number of online platform have been developed, aiming to 'democratize' alternative investments by offering the world's best PE funds for a smaller ticket of entrance. This allows you to access historical top quartile funds for a smaller minimum threshold. In the UK, an example of such platform is 'AtomInvest'. To invest you still need to be an accredited investor but you will be able to differentiate your portfolio and invest in PE firms, which normally would be impossible to access.