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The latest conditions that have assailed the fund management industry – the new normal, tough global markets, and economic uncertainty – have created challenges for private investment firms and venture capitalists. Yet the approach of these funds have proven out over a much longer period of time, through numerous investment cycles.

A key component of their resilience is due, in large part, to the fact that their successes have been built on their ability to promote sound management practices in their portfolio companies, not just the latest investment fad or the momentum of fast moving markets.

Another set of fund managers, the hedge fund managers rely on their ability to time markets and gauge changes in stock prices and the related derivative markets to create competitive advantage. Private investors use similar analytical skills, but to different effects. They use them to confirm hypotheses and assessments about how a company might perform over a long time frame.

In fact, many of the major sources of competitive advantage for the private investor are qualitative in nature: picking the right companies, mentoring their management, measuring them, and driving them towards success. Structuring deals require the conceptual skills of a master negotiator, the sleuthing skills of a master detective, and the steely nerves of a risk manager. 

Moving from a deal to a successful long-term investment requires patience, a human touch, strategic insight, and ultimately, a keen assessment of a company; market value and potential.

There are many styles of both venture capitalists and private investors. Some such investors try to get in at the earliest possible stage, when risks and potential rewards are both extreme. Others prefer more mature companies. Some move in and out, buying the distressed shells of outmoded companies, stripping out what is valuable, and then eventually turning over the streamlined company to new ownership. Some focus on specific sectors. Some buy and hold, almost as if they are investing on behalf of their grandchildren. 

The latest conditions that have assailed the fund management industry – the new normal, tough global markets, and economic uncertainty – have created challenges for private investment firms and venture capitalists. Yet the approach of these funds have proven out over a much longer period of time, through numerous investment cycles.

A key component of their resilience is due, in large part, to the fact that their successes have been built on their ability to promote sound management practices in their portfolio companies, not just the latest investment fad or the momentum of fast moving markets.

Another set of fund managers, the hedge fund managers rely on their ability to time markets and gauge changes in stock prices and the related derivative markets to create competitive advantage. Private investors use similar analytical skills, but to different effects. They use them to confirm hypotheses and assessments about how a company might perform over a long time frame.

In fact, many of the major sources of competitive advantage for the private investor are qualitative in nature: picking the right companies, mentoring their management, measuring them, and driving them towards success. Structuring deals require the conceptual skills of a master negotiator, the sleuthing skills of a master detective, and the steely nerves of a risk manager. 

Moving from a deal to a successful long-term investment requires patience, a human touch, strategic insight, and ultimately, a keen assessment of a company; market value and potential.

There are many styles of both venture capitalists and private investors. Some such investors try to get in at the earliest possible stage, when risks and potential rewards are both extreme. Others prefer more mature companies. Some move in and out, buying the distressed shells of outmoded companies, stripping out what is valuable, and then eventually turning over the streamlined company to new ownership. Some focus on specific sectors. Some buy and hold, almost as if they are investing on behalf of their grandchildren.