A public equity fund is an investment vehicle that targets growth stocks, and is typically designed to beat the benchmark Kuala Lumpur Composite Index (KLCI). It invests in a mix of Malaysian equities and fixed income instruments with at least 80% equity content. Public equity funds tend to be lower risk than index funds and don’t require advisors or a large amount of knowledge.
The fund manager selects companies that aim to generate positive social and environmental impacts. Their portfolios typically hold around fifty to sixty stocks. They also seek companies with management engagement, which can help improve impact measurement and reporting. Public equity impact funds can be an excellent option for large pension funds, but are often not suitable for early-stage private equity investments.
Public equity funds can be broadly based or industry-specific. They raise money through an initial public offering, and invest in securities according to their investment strategy. Their portfolios can include investments in private and public companies, which may be geared towards either small or medium-sized businesses, or even startups. These funds are categorized according to their investment strategy, and their IPO is typically undertaken by filing a registration statement with the Securities and Exchange Commission (SEC). The money raised from the offering is then invested into assets that the fund will own.
Private equity funds are generally managed by general partners, and their fees are generally higher than those of a public equity fund. Most private equity funds use a two-and-twenty structure in which the General Partner receives 2% of profits annually and 20% of the profits, but some private equity funds operate under other structures. Generally, these structures pay out lower fees and higher carry.