Basic Principles for the Management of Private Equity Funds
Private Equity Funds (PEFs) are specialized entities that invest financial resources on a temporary basis in companies with high expansion potential, which are in the process of emergence, expansion or development, in exchange for an equity stake in the company or private credit.
PEFs are innovative because, in addition to raising money, they share their experience and knowledge with the applicant companies or entrepreneurs. These funds provide strategic, operational, financial and legal analysis and advice; collaborate in the professionalization of the different stages of development; offer assistance on specific problems that arise; design new business approaches; and sometimes organize sales processes that maximize the value of investments.
In this way, Private Equity Funds add value to projects and improve the competitiveness of companies to increase their value in the market, which translates into higher returns for their investors.
To ensure the proper functioning of the funds and the fulfillment of their goals, it is essential to implement good practices that apply throughout the life of the private equity entity. Four principles of action stand out:
1. ESG Criteria
While having an internal control structure that guarantees the efficient management and operation of these investment vehicles is a mandatory principle for the proper functioning of any fund, implementing a strategy with social and environmental criteria helps to ensure the sustainable execution of investment projects with sustainable returns.
2. SDG Accomplishment
An ESG structure allows investing responsibly and in compliance with the 2030 Agenda for Sustainable Development Goals (SDGs). In this way, the development of added value in capital management is accompanied by long-term value where investors win, communities win, people win. In this way: We all win.
3. Legality and Transparency
Acting in compliance with the laws and regulations in force governing Private Equity Funds, as well as the proper management of the invested resources and the information generated in this regard. In Mexico, it is important to comply with the Investment Funds Law, the Income Tax Law and the Law to Regulate Financial Technology Institutions (known as the Fintech Law).
4. Focus on Compliance
Compliance with good practices should include codes of ethics, conduct and all the necessary mechanisms to govern the actions of the members of the PEFs and their functions, considering investors, partners, managers, executive team and companies receiving financial resources. These codes must regulate the attraction of investors until the sale or liquidation of the financial entity; they must also preserve the rights of investors, prevent conflicts of interest and address possible cases of non-compliance by any of the parties involved.
At MAF Capital we incorporate these principles as fundamental rules in the administration of alternative investments and the management of infrastructure and real estate funds. In this way, we have developed projects focused on health, education, road connectivity and rental housing with high impact on the development of the communities and people who benefit from these projects.
