What is an Equity Fund?
An equity fund is the grouping of investors into pool of investments, often real estate but other defined investment targeted funds exist. Generally, it’s in reference to the group of investors funding a blind pool with the manager of the fund identifying the investment opportunities.
Real Estate Fund:
Instead of only acquiring a single identified real estate property, a ‘sponsor’ sells interests in entities to fund multiple real properties, a diversified portfolio, for investors. Typically, the sponsor identifies the investment criteria, takes on the administrative reigns as ‘manager’, controls most decision-making, and contributes mostly sweat equity in lieu of or to supplement monetary equity. Investor members, who typically invest based on the track record of the sponsor, rely on the sponsor to make the real estate lucrative (whether through construction, development, leasing, repurposing, etc.), but do have certain voting rights. The sponsor is compensated via fees and a profit-sharing arrangement of usually 30-40% to ensure that incentives are aligned.
Mortgage Loan fund:
Traditional loan funds is where investors acquire an interest in an equity pool that makes loans to borrowers. Mortgage funds tend to be more analogous to real estate fund with regard to the relationship between funders and the fund management. There are generally fees and carried interests that the manager or sponsor receive to compensate them for their efforts managing the mortgage fund.
Venture capital funds:
Instead of taking on taking a risk no a single company investment, a fund manager invests into various companies with other investors.