Also know as an equity sponsor. Typically the manager or general partner of a private equity or venture capital investment fund. The sponsor is typically run by one or more private equity or venture capital investment professionals who are responsible for:

  • Forming the investment fund (typically a limited partnership or a limited liability company).

  • Organizing and promoting capital raising for the fund (typically from insurance and bank holding companies, university endowments, employee benefit plans and wealthy individuals).

  • Identifying and executing investment opportunities, including leveraged buyouts and venture capital investments.

  • Managing portfolio companies following an investment, including exiting such investments to realize a return on investment for the fund.

The sponsor receives a management fee from the fund (typically 2% of committed capital) to pay for the costs of managing the fund and shares in any profits of the fund (typically 20% of net profits) as compensation for, and an incentive to improve, fund performance.

For an overview of private equity fund formation by sponsors, see Practice Note, Private Equity Fund Formation and Timeline of a Private Equity Fund.

For more on the types of investments typically made by sponsors and their investment funds, see Practice Note, Buyouts: Overview and Practice Note, Minority Investments: Overview.

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