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| From the Editor: Worthy Notions |
Small is Beautiful
Dwight Cass
04/01/2004
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It depends on the fund. In the late 1990s boom, many private
equity funds were leviathans, often measured in billions of dollars. A
$10-million to $20-million commitment could easily be lost in the rounding; the
investor providing it was seen as hardly worth the trouble.
But the
three-year bout of fund-raising and investing turbulence that followed brought
many private equity firms down to earth. Today they promise to keep their funds
smaller and more responsive. They have learned that it is important to keep
investors happy; it is also extremely difficult to invest a megafund’s capital
profitably. The best private equity firms, after all, invest as much
entrepreneurial capital as they do money, and a venture capitalist can sit on
just so many corporate boards.
But this trend toward smaller funds has its
downside: It may become increasingly difficult to get access to the best fund
managers, especially as institutions put more and more capital into private
equity. But when we do get access—whether on our own or through funds of
funds—we should have a greater chance of securing some of those remarkable
profits for ourselves.
Dwight Cass
Editor-in-Chief
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