As an excellent development step calculated for the Capital Market Authority, investors from different segments will be able to invest in private funds that were not previously available to the general investors through technical platforms that distribute the units of these funds. These securities are an additional way for investors to diversify their investments, either in order to maximize returns or reduce risks. But before investing in this type of securities, investors need to understand one of the features of the market, which is the importance of distinguishing between the buyer’s side and the seller’s side in the financial sector, in order to reduce the misunderstanding of investment funds in general.

The difference between the buyer side and the seller side in the financial sector

The buyer’s side is often the investor or the financial institutions that represent him, such as investment funds, investment advisors, and wealth management. The role of these institutions is based on giving priority to the investor’s interest in their decisions. As for the seller’s side, it is mostly the sellers of securities and their representatives from financial institutions such as investment banks, brokers, commercial banks, and others, and the role of these institutions is to complete sales deals regardless of their suitability for investors (often the regulator sets laws that ensure fairness, transparency, and not deceiving investors).

Private funds are highly risky

Investment funds, as we indicated previously, represent the buying side, but some private funds are designed to be investment products that serve the selling side in the sector so that they serve specific parties in the fund and not necessarily the fund’s unit owners (although the regulations of the Capital Market Authority stipulate that the fund manager has the responsibility to represent Fund owners interest first). So the fund manager in this case is unlikely to focus on maximizing the return of the fund’s unitholders because the idea of the fund was formed for the project and the primary unitholder institutional investors.

This situation can be clearly seen when the real estate fund, for example, contains one project or deals with one development company, which requires you as an investor to be more careful and study the fund project independently and calculate its returns after deducting the full expenses, including the expenses of the fund itself. It is likely that the fund It was not originally created to invest in multiple projects to maximize unitholder profits.

Do you invest in these private funds?

The answer to this question is not an easy matter, as it is mainly related to the investor’s goals and his ability to bear risks, and also depends on the reputation of the real estate development companies or the project manager that the fund finances, as these companies are more keen than the fund manager on the success of the project because they use the fund for financing nothing more.