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Difference Between Private Equity And Hedge Funds

Everyone wants to invest his money in some kinds of funds or equity, motive of investing varies from person to person like some wanna hedge the inflation, some wanna invest, some wants growth and so on. There are lots of funds in which one can invest as per his needs and preference.

But while investing you might come across with term Private Equity and Hedge Funds, both are very good funds and you can invest in any of it, motive of both is same as to earn maximum returns for its investors and provide safe growth to them.

Private Equity Vs Hedge Funds

But there are some difference among both which you might need to know before you put your money or invest in them:-

  • Private Equity funds tries to invest in illiquid funds, means which cant be sold in short term and generally invested in whole company, but on the other hand Hedge Funds tries to invest in liquid funds which can be sold in short terms and they don’t seek control in company but as Equity funds invest in whole company they want part in control of company.

ALSO READ :- An Overview Of Private Equity Investments & Funds

private equity vs hedge funds

  • Hedge funds are more flexible as compared with Equity funds to take short or long position in the market according to the position of commodity.
  • Management were paid fee of around 3% in both Equity and hedge fund and performance fee of around 20%. But the difference is that in Private Funds get Performance fee once investment is exited but in Hedge funds performance fee is paid Quarterly or yearly.
  • Private equity tries to invest in private companies with long term commitment and its intention is to invest more, grow and then exit the company, But Hedge funds invest in tradable securities like equities, bonds, derivatives, futures, commodities, foreign exchange, swaps, etc.
  • Usually Private Equity funds are invested for longer time period mainly for 5 years more but Hedge Funds are invested for short time period like yearly quarterly or some time minutes or for seconds with no intention to grow.

ALSO READ :- What Are Hedge Funds?

  • Investors of Hedge funds can pull their money anytime if they find that asset is not performing well and then can invest in some other asset but if you had invested in Private fund then this option is not available for you.
  • Hedge funds are more transparent as compared with Private Equity as they can be judge by almost any investor anytime. So if you want high returns in short period then you can try Hedge funds but if you want stable and long period term returns then go for Private Equity.

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