Dec 1, 2006 12:00 PM

, By Elizabeth Miller, managing director, Trevor Stewart Burton & Jacobsen Inc., New York

By Elizabeth Miller, managing director, Trevor Stewart Burton & Jacobsen Inc., New York

Private equity is a hot investment these days. And while you may be referring your ultra-high-net-worth clients to established private equity firms, don't be surprised if a wealthy client asks you for advice on a private investment opportunity that's been offered by a friend or family member. These investments are generally less than $100,000. They rarely come with an offering memorandum. And their time frames are often unclear. Worse yet, your client may have relationship reasons for wanting to make the investment.

“Private equity” — very trendy these days — refers to a broad range of investments in nonpublicly traded companies. Some of the popular approaches include venture capital, leverage buyout's, angel investing or mezzanine capital. But, even though Thomson Financial reports that almost $28 billion was raised for these complex approaches in the third quarter of 2006, the most common private equity investments are still small ventures that rely on relatives and friends for funding. Wealthy people are natural prospects for these “opportunities.”