In the high-frequency world of alternative securities, private equity and venture capital investments stand out for bringing in substantial returns from equity appreciation and capital gains.

Private equity firms align with accredited investors, like wealthy individuals and institutions such as foundations, university endowments, pensions, insurance companies, and other multi-manager funds, to buy mature, established companies that have either filed for bankruptcy, or have been struggling to maintain profitability.

This limited partnership typically acquires a large stake in a troubled company, takes seats on its board, and infuses cash for loan buyouts and restructuring, in order to nurture the organization back to solvency—within a span of four to 10 years. When the underlying company’s value has increased significantly, the fund’s manager then sells it at a profit that benefits the initial investors.

Though venture capital firms follow a similar investment pattern, they purchase startups built around technology, renewable energy, biotechnology, health care, and lifestyle instead, and over five to eight years finance the necessary activities that will make the young enterprises commercially viable, in preparation for a sale.

While returns in this sector of alternative investing can be undeniably staggering, however, the amount of administration, research, and reporting required in this financial sphere is likewise extensive.

Private equity firms work side-by-side with entities like transaction professionals and mergers and acquisitions brokers, maintaining a steady influx of high quality candidate companies for investment review. Private equity fund managers also constantly conduct intensive evaluations of the financial histories and projections, management profiles and backgrounders, and industry positions of their firm’s target companies, for valuation analysis and investor due diligence—to determine if the acquisition is a good fit for the fund and its partners interests.

Private equity firms often put their acquisitions through complete corporate rehabilitation, with an emphasis on minimizing liability, upsizing returns, and creating continuous improvements in market value from the inside out. The daily practice of scrutinizing and resolving operational and financial concerns is crucial for taking the private equity firm’s underlying companies back from the red and onto the side of profitability.

Guided by integrity, swiftness, and purpose, asset servicing firms can deliver efficient fund administration, real-time data monitoring and reporting, and turnkey accounting and tax preparation for alternative investments requiring dedicated attention, such as private equity. With their asset servicing solutions and comprehensive data support, private equity general partners gain the power to make the right trade and operational decisions for the fund, when it counts the most.