@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.
The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".
Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that?
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"Growth Capital" vs "Private Equity" AIC sectors
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Re: "Growth Capital" vs "Private Equity" AIC sectors
mc2fool wrote:@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.
The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".
Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that?
I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)
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Re: "Growth Capital" vs "Private Equity" AIC sectors
DavidM13 wrote:mc2fool wrote:@DavidM13, I am a little unclear of the difference between the AIC Growth Capital and Private Equity sectors.
The AIC Sectors page says of Growth Capital, "Invests in unquoted shares. Generally takes non-controlling stakes in early to maturing companies", whereas Private Equity is described as just "Invests in unquoted shares".
Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that?
I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)
Ummm, ok, well then maybe a better description that lets users see what the distinction is between the two "Invests in unquoted shares" sectors (whatever that is!) ...
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Re: "Growth Capital" vs "Private Equity" AIC sectors
mc2fool wrote:Is the controlling/non-controlling stakes the essential difference, and if so might it not be a good idea to amend the description of Private Equity to include "Generally takes controlling stakes in...", or is it not as simple a split as that?
No. Private Equity often (mostly?) takes non-controlling stakes.
I think Private Equity is a broad umbrella, ranging from asset-strippers who are the classic media villains, through specialists such as rescue/turnaround experts, to Venture Capital supporting growth of up-and-coming companies. I'm not familiar with the Growth Capital label, but I'd suspect it sits somewhere within PE, perhaps close to VC but without the special rules and tax incentives.
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Re: "Growth Capital" vs "Private Equity" AIC sectors
DavidM13 wrote:I would say its probably not as straightforward as that. The main reason being the private equity sector also has a number of "Fund of Funds" within it (around half a dozen or so from memory)
So what's the answer then? What is the difference between the AIC "Growth Capital" and "Private Equity" sectors? And what is the full description of them?
You (the AIC, not you personally ) must have a definition, at least one that defines which ITs go into which sector.
I can find all sorts of definitions of the two online, but I think you have to agree that the AIC definitions (at least, according to the glossary) are rather vague and ambiguous.
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Re: "Growth Capital" vs "Private Equity" AIC sectors
Growth capital also referred to as expansion capital is a sub sector of the entire unquoted equity universe. It is when a private equity firm makes a non-control, equity investment in a company. Cash is received by the company and not the selling shareholders in order to provide expansion capital for the investee company. Leverage is rarely employed on the investee company to finance the purchase price.
There are a number of sub-sectors within the unquoted investments universe and it wouldn't be possible to have an AIC sector for each but this area was identified as one with a meaningful size in order to create this new sub-sector of Private Equity named, Growth Capital.
There are a number of sub-sectors within the unquoted investments universe and it wouldn't be possible to have an AIC sector for each but this area was identified as one with a meaningful size in order to create this new sub-sector of Private Equity named, Growth Capital.
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Re: "Growth Capital" vs "Private Equity" AIC sectors
DavidM13 wrote:Growth capital also referred to as expansion capital is a sub sector of the entire unquoted equity universe. It is when a private equity firm makes a non-control, equity investment in a company. Cash is received by the company and not the selling shareholders in order to provide expansion capital for the investee company. Leverage is rarely employed on the investee company to finance the purchase price.
There are a number of sub-sectors within the unquoted investments universe and it wouldn't be possible to have an AIC sector for each but this area was identified as one with a meaningful size in order to create this new sub-sector of Private Equity named, Growth Capital.
Aha! Ok, great, thanks David.
Now maybe you might consider changing the glossary descriptions of the two sectors to reflect that? (Or at least a condensed version thereof).
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