Private Equity Fund Structure Explained

[@itsmanishaaa]

As someone who's audited Private Equity clients - i can confirm this is all you need to understand how PE fund works, great video and very simply put!

[@ankitbiswal710]

Which firm do you work for?

[@barryallen6927]

Charlie Munger explained very well how that scam works.

[@itsmanishaaa]

@@barryallen6927 lmao true

[@brison9972]

relax ​@@barryallen6927

[@ophidiaparaclete]

Propaganda? Private equity extorts and steals pension funds with zero accountability. Crooks on steroids. Confidence game.

[@MagdaleneM-f3q]

One lesson I've learned from millionaires is to always put your money to work, no matter how small. Even investing €200 per month can compound to tremendous wealth over decades. The key is to keep going!

[@Erikkurilla01]

My advice for who wants to grow financially this year, invest. Saving is good, but investing elevates your finances. Thanks to my financial advisor, my portfolio is thriving, and l'm proud of last year's decisions.

[@jessicasquire]

People often don't realize how important financial advisors are. Data from the last 50 years shows that people who work with CFAs usually earn more than those who don't. I've worked with a Adviser for 7 years, and now I have a $2 million portfolio.

[@jessicasquire]

I've stuck with ''Julianne Iwersen Niemann" for some years now, and her performance has been consistently impressive. She's quite known in her field, look her up..

[@Ballesteros-d]

60% equities 40% cash. I plan to take advantage of the current market situation as leading indicators predict a bullish S&P 500 by 2025, my only concern is how to properly allocate a large stock/bond portfolio for maximum potential returns.

[@mette-lo]

Agreed, investing with the help of an advisor did the trick for me in barely 5 years. I worked hard everyday as a teacher for 32 years and my salary was over 100k, enough to get me invested. I'm semi-retd today with nearly $1m, and only work 7.5 hours weekly.

[@StephenTho42]

​@@mette-lo how to put my money to work has been my daily thought, did my research and most suggestions pointed at the stock market, the thing is i'm an absolute noob at investing... mind sharing info of this professional guiding you please?

[@mette-lo]

Karen Lynne Chess is the licensed advisor I use. Just google the name and you'd find basic info. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.

[@FrankHaubrich-mt6gw]

thanks for putting this out, curiously inputted Karen Lynne Chess on the web, spotted her consulting page and was able to schedule a call session, she actually shows a great deal of expertise

[@katepark1067]

OMG. BRIDGER. I never fully understood how things worked in PE and in general Real Estate Industry but as a visual learner, this is so much easier to digest. I will be coming back to review later on. Amazing video! thanks!!

[@michigan_616]

May we get more in depth with LPA and PPM?

[@BestofUsInvestors]

I leaned a lot. Your dad is a good teacher.

[@tfm_patrick]

5 minutes in and I can’t turn off this video, you just earned yourself a like and subscribe

[@bridger_pennington]

Thanks Pat! Hope to keep it coming

[@Michael-iw3ek]

Love the phrase "whether they are good managers or not they get 2%" --- lots of good BSers swim in these murky waters and get rich in the process. Don't need to be Bernie Madoff or Fried to skim a few million for yourself. And love that this doesn't have stupid background music, and that he gets right to the point, no BS, no crazy camera cuts or angles, just quality content.

[@Scott-kc5fg]

Working for a third party administrator in the AI field, your videos are helpful and pull back the curtain.

[@carinahernandez8013]

Super informative video! I’m a PF tax intern and was totally lost on how to explain what I am doing to other people haha

[@prashanthkumar2044]

Hey man, this is really a cool way to explain the concept. I got it all injected now. I'm all in for your upcoming videos. Could you please differentiate between the IRA and the GP??. Please tell me if there are playlists already on private equity and Hedge funds... Thank you.

[@mitchkantarovich]

Do you take any deposit instead of upfront fee? Does a commencement fee count as mgmt fee?

[@bridger_pennington]

Some funds may take a deposit or commencement fee instead of an upfront fee, but it depends on the fund structure and terms. A commencement fee is typically a one-time fee charged at the start and is separate from the ongoing management fee, which covers the cost of running the fund

[@perfectcapital]

Do you have to charge both the fees? So helpfull

[@frankyalcala2048]

I’m gonna watch all your videos but I definitely want to dig into this further. Do I just start an LLC? Do I start to LLCs?? How do I set my Bible up?? I have a Lot of questions. I want to make sure I’m studying the right thing! You said you got too many investors! Maybe you can connect me with some of the ones you can’t use Once I understand the structure and mechanics Of everything A little better

[@bridger_pennington]

Hey Franky, a ton of great questions. You can book a free call with one of our fund coaches and ask as many questions as you want here: www.fundlaunchsecrets.com/15min-gameplan?sl=yt

[@vendingmachinemasterpiece6824]

Bro you should have over 1M Sub this is crazy info. I just raised cap for a fix and flip and wanted to see how I could take that to the next level and this, this is it.

[@privateequitywithdarylle4731]

Agreed! He’s amazing

[@vontay00]

Great Video!...do you deposit investor funds into individual bank accounts or do you pool all the funds in to one account and track via accounting backoffice

[@waltergalaga3379]

They pool the money on Limited partnership bank account not yours

[@Mr.RajuAgutla]

Could you please explain the Master feeder structure and the use of blocker funds in private equity...

[@georgeekins1161]

Good content. One point, if you're offering is structured as a Red D (Accredited Investors only) or Reg S (foreign investor), no licensing is required if the issuer of the Fund (GP) is receiving the fees, including investor procurement fees (1-5%).

[@geelim6999]

Where can I verify this info?

[@mattks1001]

@@geelim6999 I can't verify his info, but SEC.gov is a good place to start. They go into some detail on this.

[@ShotgunEric]

Truly thank you for diving into this Bridger, that's whatsup!

[@cwginallen]

Bridger, great video. In your example with VicSec & Geico, is there an LPA per company that defines the LPs %? for example, if LP#1 wants to invest into VicSec but not Geico, do they have that option?

[@bridger_pennington]

Thanks! In many cases, funds operate under a single LPA (Limited Partnership Agreement) covering all investments, meaning LPs typically invest in the entire portfolio rather than individual deals. However, some funds use a deal-by-deal structure or create separate SPVs (Special Purpose Vehicles) for each investment, allowing LPs to choose which deals to participate in. The approach depends on the fund’s strategy and structure." This is for informational purposes only.

[@pablocintron3877]

How and who establishes the projected value in order to have equity?

[@bridger_pennington]

Visit fundlaunch.com there’s a whole community you can become a part of that will help answer question and help you move forward in your investments and fund raising.

[@joojiebee]

Is it common for the next fund started by a private equity partnership to purchase assets owned by the previous fund? For example: Fund 1 closes with 3 companies that could not be sold. The subsequent Fund 2 purchases these companies at a fair valuation. Thanks!

[@bridger_pennington]

Yes, this practice, known as a secondary transaction or a fund-to-fund sale, is relatively common in private equity. It allows Fund 2 to purchase assets from Fund 1, especially when Fund 1 is nearing the end of its lifecycle but hasn’t exited all investments. These transactions typically require an independent valuation to ensure fairness and avoid conflicts of interest. Investors in both funds need to be informed and often must approve the transaction.

[@PotatoMan1491]

Like and subed, Bridger, I got 2 questions - What's the relationship between IRA and GP ? Are you the GP of your fund? - If you are only charging performance fees, how do you fund the expense of legal/accountant fees up front?

[@aprilmeng74]

There’s management fee for operations

[@InvestorMattU]

I think you meant RIA in your question, So since it hasn't been answered yet, I will take a stab: 1) The RIA is an investment advisory expert, and is many times, but not always, a division of the GP sponsor. So as an example, a private equity fund "ABC Partners" will have a subsidiary called "ABC Asset Management" that is registered with the SEC, and requires licensure for its representatives. This asset management subsidiary evaluates the investment opportunity set (deal flow) and does the screening and to due diligence to recommend candidates to enter the limited partnership. There is an investment committee for the GP (which may include, But it's not required to include, members of the asset management arm as well as the GPs). If the GP has significant knowledge of a space where they can source and due diligence the deals themselves, they don't necessarily need an RIA if they are offering to very specific types of clients (read: Qualified Purchasers), however, it is common practice to have an RIA participate (often they will pay them a subadvisory fee and allow participation alongside the GP), especially as more strategies include opportunistic sleeves that require niche domain expertise I can be difficult to build in-house. Also, in addition to domain expertise, they also are approached with far more deal flow and have many more opportunities to evaluate for inclusion. Small fund managers often don't get a seat at the table for many lucrative deals unless they have an established player sitting at the table on their behalf (the RIA). This is especially true in GP-led transactions which are becoming a larger part of market deal flow. 2) Usually, a GP will seed a strategy with its own money and handle some initial expenses. They can also implement credit lines to help pay for these in the near term. Legal, accounting, and other operational expenses are higher in the beginning of a fund's life, as there are fewer LPs to spread the cost across. They are covered under either management fees or other accrued expenses. Often, they are subject to a cap on expenses for LPs, but they are still paid and a meaningful contributor to the depth of the J-Curve. Your performance fees should be based on net performance, so an 8% pref with total legal/admin/ops/management cost of 1.1% would need a 9.1% gross IRR to start collecting GP catch-up and/or carry. These are round numbers, and the calculation can be a bit different depending on if you are doing deal-by-deal or fund-as-a-whole performance calculation.

[@PotatoMan1491]

@@InvestorMattU Thanks for the excellent insights Matthew

[@2forfun007]

How do you license the fund, such as Llc or S corp and etc ?

[@manaswitasarma3877]

If we don’t want to have RIA but want to charge management fee than do we still need the Series 65

[@bridger_pennington]

That's a great question. Whether a Series 65 is required can depend on how the fund is structured, what type of assets are being managed, and the specific regulations in your state or country. It’s always a good idea to consult with a securities attorney or compliance expert to make sure everything is set up properly. This response is for informational purposes only and not financial advice.

[@jennifergonzalez6431]

Ah! Thank you so much. I landed an internship somehow for a private equity fund & I'm freaking out because I want to do a good job

[@FromikaStan]

I’m a freshman in college. What was your major/work experience?

[@srivr15]

is RIA part of GP? And you said the GP are paid using the Performance Fee. But Perf fee is variable right? As far as i know in the projects that i have worked, GP is given fixed 2% to manage the fund. Am i missing some thing?

[@bridger_pennington]

The RIA is a separate entity from the GP and collects the management fees, they're typically owned by the same people

[@cajigarsahedani5741]

Hey , you have got a new subscriber from India🇮🇳

[@sandraliew135]

i love you man, I a newbie to PE...and finally understand how it works after watch ur video!!!

[@eugenioordonez5480]

Does a PE fund has only one or multiple GP? How can they ensure that value will be created to the purchased company?

[@bridger_pennington]

Yes, so my Dad's funds have around 11 GPs and 107 limited partnerships. They then all roll up to one master entity and board. They'll incentives different leaders by giving them equity in different GP's under the same umbrella

[@guilherme.alberto]

8:05 How long ago the investments were made doesn't influence how much investors receive?

[@bridger_pennington]

The timing of the investment affects returns because early investments can benefit from market growth and compound interest leading to higher returns.

[@luisbecerra8152]

What are the best online sources to get the fund started? The structure.

[@bridger_pennington]

Thanks for the comment Luis! You've come to the right place to start a fund, we have plenty of free trainings on how to structure your fund right here on our KZbin. I'd recommend checking out our KZbin Playlist "How to start from Scratch" series, or if you specifically have one kind of fund in mind we have playlists for each kind of fund.

[@chackothomas8929]

Really high quality content! Could you make a video on how large your first fund be? Thanks!

[@Mr.Moneybags40]

bridger question: wouldnt the RIA advise the GP instead of the LP? , cuz the GP is making the decision of what or what not to buy for the benefit of the LP's???...thx

[@levilewis1]

Can the RIA and the GP be the same person or SPE? Most videos say the management fee goes to the GP for the running of the fund.

[@bridger_pennington]

So yes, you can be an owner of both the RIA and GP. People will say the mgmt fee goes to the GP because they assume they're the same entity when in reality they're usually separated.

[@bumblebum32]

Love this. Comprehensive explanation. You got a new subscriber dude! Thanks alot!

[@bridger_pennington]

Thanks for the sub! Really appreciate it👊

[@ajc4132]

Great video! Question on what the fees (say performance) are based on- annual bet revenue? And how are they “taken/paid”? Any video on that? Meaning if you hit 8% growth- I assume that is 8 percent compared to previous year of net revenue- and then from only that 8% that money is distributed?

[@bridger_pennington]

Performance fees are typically based on the annual growth in net revenue or profits compared to a benchmark, such as an 8% increase over the previous year. These fees are usually taken as a percentage of the profit exceeding the benchmark and are paid out to managers or investors from that excess amount.

[@carefulconsumer8682]

How is the liability of the LPs determined? Is that written in the limited Partner Agreement also? So if the LP who puts in 4%, is his liability (if they get sued) limited to 4% of whatever they are sued for? Thanks.

[@siroseoane6342]

Hey, can a fund be the LP of another bigger fund

[@perfectcapital]

What is Performance and Mangament fee in simple terms?

[@BigAl-o7b]

Do you lever your fund with debt? I’ve heard it’s common for PE funds to only invest a fraction of the money raised from LPs. That they usually go out and borrow from banks or make other companies in their portfolio take on debt in order to lever their asset purchases.

[@bridger_pennington]

No, but there are funds that do so!

[@ChickensBarbie]

As a PE fund professional, I like this!

[@mohammedarshadpasha4073]

Buddy you were good enough to explain in a nut shell about the private equity concept however I liked it and appreciate your hard work well done on 12.15 minutes video & You have gained me as new subscriber usually I don’t subscribe any channel but I did subscribed now hope to see and take more knowledge on various other topics from you. Keep doing great work. Thanks & regards, Arshad

[@felipetorra4159]

what are the functions of the GP and RIA

[@Michelle.RealEstate]

How do annual returns performance base off of non performing if vacant properties in a short term fund 😅

[@shahin21184]

This is brilliantly explained! As opposed to a lot of video's talking about PE. Thank you!

[@jaydubb85]

What percentage is the GP? Generally

[@jaydubb85]

oh 80/20 etc duh..

[@streetguru6240]

BIG THANKS! YOUR EFFORTS LIVE ON..

[@sheronyobispo5317]

Thank you for this bro!!!!💪🏾 just started workin in field of finance over 2 years now this was a massive help

[@waltergalaga3379]

What's the difference as entitities as RIA and GP, could be the same o must be distinct each another? 🤷🏻‍♂️⁉️🧐

[@bryantorres4834]

Great value within a great format. Kudos my friend. 🎉

[@rockerznusantara7318]

so when people say "PE firm", who are they referring to? GP or LP?

[@bridger_pennington]

When people say "PE firm," they are typically referring to the General Partner (GP). The GP is the entity that manages the private equity fund, makes investment decisions, and operates the fund. Limited Partners (LPs) are the investors who provide the capital but do not manage the fund.

[@rockerznusantara7318]

@bridger_pennington thx for replying sir..one more last question, is it mandatory to appoint advisory firm, or is it optional?

[@charlestoncoliving]

SUCH a great video man! I rarely subscribe to channels. Just did with yours. Excited to go through more of your content!

[@bridger_pennington]

Thanks so much! I'm the same way so I appreciate it!

[@edwardhyon8979]

This is great work! Would be good to get videos on pass through and parallel entities and why they are structured.

[@udaykumar-jv3it]

Yeah even I want to lear about that. Please make a video.

[@zarakareem4716]

hey I do taxes for Private equity partnerships, structuring is usually done with tax issues in mind. Parallel entities in particular are set up for tax issues, so usually one will be a foreign corp and one will be a domestic partnership. The foreign corp will hold all the tax exempt and foreign investors to block ECI and UBTI, inorder to reduce any tax filing requirements for the LPs. The domestic partnership will hold all the US partners that are nto tax exept and dont need to be blocked.

[@dianatifrea5970]

Nicely explained! thanks Bridger

[@cranegantry868]

Nice explanation, it was all a puzzle to me before.

[@felixfelsmann651]

how is the profit split when the property is sold?

[@rayghaantheunissen2903]

Great video simplifying a PE structure 💯✅

[@bridger_pennington]

Appreciate it!

[@jordanroper5739]

Any good books on this stuff?

[@tedmeng4795]

10:56 I am wondering why Bridger makes zero money when the funds make 6% return? Is it because it doesn't reach the threshold of 8%?

[@giocorpus444]

Can you do a video on how to start a bank and investment bank

[@abheetnigam]

Subscribed right away, loved the content

[@benderthegreat4728]

Great content content, I started to do real estate and PE is on my goal list, thank you

[@bridger_pennington]

Awesome keep me posted on how it goes!

[@oscarjosephanonas407]

Great content ! What’s the suggested performance fee given there is no management fee?

[@AMGNEO]

Can you talk about the best ways to approach a PE fund in order to get on their contact list and become notified once they begin the sell of one of their companies that you are interested in purchasing

[@samzhao8611]

Nice video! Thx for explaining the PE structure

[@tomjens2046]

So if you create such a fund, you would want to get that 2% management fee to yourself. And you are saying that instead of getting that 2% yourself as a manager, you hire some RIA and he gets all those 2%? That is interesting because most people though that it goes to the fund creator/manager, not some hired advisor

[@Derbb]

Are you counting in acquisition fees, in real estate construction fees, and disposition fees? By the way, definitely worth it to get that series 65.

[@rightright6582]

Why?

[@ajay_polireddi5758]

Great work my friend.....

[@finbox7496]

Hi Bridger, thanks so much for the great advice. Question, is it possible to be a Managing Partner while also be a limited partner to put some extra money to work for you? Best G

[@faable94]

I find your videos very helpful. Could you please make one for vintage structure in PE funds and also about equaliation payments?

[@bridger_pennington]

Specifically what do you want me to cover in vintage structure?

[@faable94]

@@bridger_pennington I was thinking about the explanation of vintage idea in the fund in general, how such funds work. I deal with vintage funds, however it is not really clear to me why vintage years exists, why fund cannot have ore closes and call all commitments quicker instead of having vintage years. Why is this structure good, why is so important that vintages need to be called in an order 1,2,3...

[@VIPERAgarioGaming]

Could you make a video on tax havens for private equity firms? Loving the content man!

[@bridger_pennington]

Noted! Thanks for the idea

[@kingdomdreams4]

Bridger Pennington and did you form an S-Corp or Corp for your Fund?

[@waltergalaga3379]

@@kingdomdreams4 the biggest problem with S Corps, only can be ownes by US citizens and not corporations 🤷🏻‍♂️🥴

[@Dcoleman44]

Can a holding company be a private equity firm?

[@johnmcpherson5137]

According to other videos on the topic, this is how (99%? of) PE funds are usually structured in the USA. The European model via closed-end fund structures, is rather different. 🤔I believe some are even advocating that US-based firms should adopt the European model.

[@martinsbriglio8948]

I love your presentations . We are a family with several commercial properties or residential. We haven’t scaled . Your program could change that .

[@eadigwe]

I thought the GP buys and sells the investment assets...?

[@mattsaba9609]

Amazing video Bridger

[@bridger_pennington]

Thank you!

[@stevenw373]

Bro your videos are gold!

[@internationalassetliquidit5000]

Well done Penn...!

[@mattball7074]

Thanks for making these videos buddy

[@scheryjohn1539]

you said if the fund makes only 6% a year, you make zero dollars. why is that ? is that because you have guaranteed a percentage to your investors for the performance fee ? or is it something else. Kindly note pls take the question positively. Bit curious to know more about the performance fee.

[@illuminated2438]

In an example like that, that would mean the LPs (the investors) receive 6% as a “preferred return.“ The waterfall does not kick in unless you exceed preferred return (and perhaps if the investors have not been paid back their original investment, either).

[@yeuemxuatdoi]

I just watched some videos about how private equity firms destroyed Toys R Us, mobile home parks...

[@alexeymikheev7814]

It is not much structure difference between PE and Hedge Fund?

[@aminesellami4891]

Amazing clarity

[@bridger_pennington]

Thank you 🙏

[@lauragraham8670]

This was Great information about Private Equity Fund. I will share this with other who do not know how a Private Equity Fund is Set up like the BIBLE you set the RULES. Thank you so Much Bridger Pennington! I'll REPLAY!!!

[@anthonyaporbo3382]

clear and brief explanation, learned a lot from a short discussion

[@Bmywudt2]

What is the structure like when a start up founder is involved.

[@dilsaj4200]

Thanks, so helpful!

[@bridger_pennington]

no problem!

[@BarrettTacticalAcademy]

Subscribed !!

[@bridger_pennington]

Thanks!

[@raashigupta4111]

Wow, this is an awesome video! Can you please also make a video on Secondaries?

[@theultimatereductionist7592]

How about the private equity firm employees or wtf they are called do the actual work, labor, jobs of the companies that they acquire >50% ownership in, support unions of those workers, etc and then - only after all that - at the end - if they make a profit - exit.

[@Topgear.filmer]

do I need an LLC for a fund?

[@dazzybizzle]

Heard the first 1:27, and I immediately subscribed, Love the transparency.

[@bridger_pennington]

Really appreciate it👊

[@quiet2445]

I am so inspired thank you so much for sharing this knowledge you have no idea how much you have empowered me thank you and good luck in all your endeavors!

[@Chandravadancena]

You are helping a lot of people. Thanks a lot

[@mukeshkumar-tg7hf]

Hi Bridger.. A very insightful video I must say.. Can you please tell us about investor allocation in private equity funds

[@chasingmillions5253]

Fund manager here. Cute video.

[@bridger_pennington]

Yes! Thank you!

[@stfdituaful]

You are a great tutor. I will pick you as my mentor if you don't mind. I am ready to pay the appretenship fee.

[@michellehenrich4836]

Awesome explanation - really clear

[@youtubecommentrater3379]

Let’s Go! 🔥🔥🔥