Lead Edge Capital, a technology-focused growth stage investment firm, has closed a $150 million public equity fund. The new fund brings the firm’s total capital under management to over $3 billion. The company’s strategy involves investing in emerging and established companies in private and public markets. The firm expects to hold five to ten positions at a time and expects to build its initial portfolio over the next two years.
A public equity fund is an investment vehicle that invests in a wide range of equity securities that are publicly traded. Public equity funds can be sector-specific or broadly based, and the income earned by each investor is shared pro-rata. Public equity investments are highly regulated by governmental bodies, which require the companies to publish financial information about their stocks and assets.
The most common type of public equity fund is a mutual fund. Mutual funds are investment companies that are governed by the Investment Company Act of 1940. They can trade on a national securities exchange or over-the-counter. Mutual funds offer limited redemption rights that allow investors to sell back their shares at net asset value.
Large buyout firms typically charge between one and two percent of assets under management. They also charge 20 percent of all fund profits. These profits are generated primarily from capital gains on portfolio businesses. Taking a company private is a complex process that requires significant changes. Private equity firms often work with the company’s management to make major changes. For example, when KKR and GS Capital Partners acquired Wincor Nixdorf from Siemens in 1999, the firm worked with the management team to continue the company’s strategy while making changes to the company’s operations. Another example is the Toys “R” Us acquisition, which involved replacing the top management team and developing a new strategy for the company.