Private investment funds are collective investment vehicles established for the purpose of investing money from investors on its behalf for collective gain. As the name suggests, these investment funds are not open to the public and do not take retail or institutional investments from large numbers of outside investors. Instead, private investments funds rely solely on investments from a small number of “qualified” investors (typically individuals or groups with a net worth of more than $1 million, or those who can demonstrate an income of over $200,000 for the past two years). Private investment funds are classified as such according to exemptions found in the Investment Company Act of 1940 and the corresponding SEC regulations.

Hedge funds and private equity funds are two of the most common types of private investment funds. Whereas hedge funds are managed to generate returns through a variety of strategies and investments, private equity funds are instead focused on Investments in private companies. For both types of funds, there is a finite amount of money available for investment and a limited amount of time in which to invest it, though private equity funds will typically have a longer term time horizon than hedge funds.

Private funds can present certain advantages to investors, such as the ability to access more complex investment strategies. As private investment funds are not open to the public, investors can benefit from greater flexibility and control over where their money is invested and when. Furthermore, since private funds are not subject to the same disclosure requirements as public funds, investors may gain access to investments and strategies that are not available to the general public.

At the same time, private investment funds can introduce certain risks and obligations that may not be applicable with public funds. For example, as a qualified investor, one may be required to sign binding agreements and privately placed securities that contain language that may not be understandable to the average investor. Additionally, private investment funds tend to have high minimum levels of investment and are subject to small offering sizes, which can cause them to be less liquid and less diverse than public investments.

In summary, private investment funds can offer certain advantages to investors such as access to sophisticated investments and increased flexibility, however it is important to understand the risks and obligations associated with such investments before committing any money.