What are the Different Types of Investment Partners?
Investment partners, or investment partner firms, are companies which take capital from businesses and individuals and invest it for a commission. Investment partner firms combine monies from their clients to create a fund and purchase investments. Firms differ on their investment strategy, assets they choose to purchase and clientèle. The philosophy of the firm is determined by areas of expertise, timeline of goals and investment strategy.
Many firms take a hands-on approach to any business they purchase, dealing directly with sales, marketing, human resources management and other types of day to day operation. This is a key difference between a financial advisor and an investment partner. An investment partner not only ascertains what to purchase but also interacts directly with that asset.
There are many types of investors. One might be a large company with liquid assets and another might be an individual with a hard-earned nest egg. Not all investment firms deal with every type of investor. Some only accept clients with large amounts of capital, while others focus on individuals with relatively small amounts of capital. Regardless of the size of investment, investment partners strive to increase the wealth of their client by focusing on a specific area of expertise.
Expertise is determined by the individuals who make up the investment partner firm. They might have experience in stocks, real estate, fixed income, sports teams or any other area which has the potential to make a profit. Typically, an investment partner firm focuses on one area. For the individual, it may not matter what the field of expertise is as long as the firm consistently makes good investments. Other investors might wish to choose an investment partner which reflects their own interests.
Investments typically fall into two categories: private equity or venture capital. A venture capital firm is a type of investment partner which funds start-up businesses. These types of businesses are high-risk since they have not yet proven profitable, and venture capital firms receive large equity shares in these businesses in return for capital. A private equity firm might include venture capital investments, but, typically, they handle more mature businesses and lower-risk assets.
Most investors have a timeline—short term or long term. Investment partners also have a timeline which affects their overall philosophy and strategy. For instance, a firm which purchases brownfield, or abandoned and unused property, typically has a plan for redevelopment which takes several years. Another investment partner may focus on new technologies and act quickly before the technology becomes obsolete.
Investment partners are limited by the size of their fund. Firms with large funds will purchase different investments than firms with a small fund, but both large and small funds have the potential for significant returns. The advantage of a firm with a large fund is that a greater variety of investments are available, but often, these firms only cater to investors with large sums of capital.
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