The minimum entry level for investments in private equity funds is falling dramatically and they are becoming this year’s must have investme...

The minimum entry level for investments in private equity funds is falling dramatically and they are becoming this year’s must have investments for everyone from the ultra-high net worths to the mass affluent. Investments in these vehicles can now be made for a little as $25,000. At the top end of the market some private equity funds may demand minimum investments well into the millions of dollars, but more commonly now the “mass” market is served by retail banks and investment banks such as Citigroup and JP Morgan. These banks often have a marketing partnership with well-known and established private equity heavyweights such as the Carlyle Group. Carlyle’s latest offering, Carlyle Partners IV, raised $7.85 billion and closed to new investors in March. This raised around 23 per cent from high net worths, a record for the company. The company is aiming for a 25 per cent per annum return for the fund which was marketed by both Deutsche Bank and UBS. Elsewhere, it is now possible to invest in Brown Advisory’s private equity funds for $25,000. Previously, $250,000 was the minimum. Similarly, US Trust offers private-equity fund investment from $50,000. But investing in private equity has its risks. The investments are notoriously illiquid and it is estimated that around one in eight start-up businesses ultimately fail. If a fund does not spot the success story, investors can loose all their money or end up supporting the fund with additional drawdowns. Management fees, too, are high, often reaching 2.5 per cent per annum – well above standard hedge fund fees.