The objective of this diploma thesis is to introduce the sector of Private Equity and Venture Capital which is aimed to finance perspective companies that are not publicly traded. The first chapter presents the development of sector and main featuring players on the market. The second chapter explains phases of the investment process. The topic of the third chapter is analysis of the sector in terms of development trends and comparisom of particular types of investment as well as comparison of the main markets which are the USA and Europe. The goal of the last chapter is to present and analyze the Alternative Investment Market in London as a new market for the venture capital backed companies.

In this paper, we explore drivers and mitigators of agency conflicts inherent in the fund manager-fund investor relationship through the lens of the principal-agent model. By engaging in abductive qualitative research, we apply both deductive and inductive inquiry to complement and extend previous literature with insights from parties directly involved in the Swedish mutual fund market. Hence, data is collected from eight semi-structured interviews with four senior fund managers, three institutional investors and one fund investment association, all operating in Sweden. The results of the study show that agency conflicts and mitigators found in previous studied principal-agent settings are also in large part found in the fund manager-fund investor setting in Sweden. However, this study has extended previous research by generating knowledge about drivers and mitigators of agency conflict found in the real world, which have been left unexplored in previous studies.

During the work of this research project we were interested in mathematical techniques that give us an insight to the following questions: How do we understand the trading decisions made by a manager of a hedge fund and what influences these decisions? In what way does an illiquid market affect these decisions and the performance of the fund? And how does the payment scheme affect the investor's decisions? Based on existing work on hedge fund management, we start with a fund that can be modelled with one risky investment and one riskless investment. Next, subject to the hedge fund special reward scheme we maximise the expected utility of wealth of the manager, by controlling the percentage invested in the risky investment, namely the portfolio. We use stochastic control techniques to derive a partial differential equation (PDE) and numerically obtain its corresponding viscosity solution, which provides a weak notion of solutions to these PDEs. This is then taken to a liquidity constrained scenario, to compare the behaviour of the two scenarios. Using the same approach as before we notice that due to the liquidity restriction we cannot use a simple model to combine the risky and riskless investments as a total amount, and hence the PDE is one order higher than before. We then model an investor who is investing in the hedge fund subject to the manager's optimal portfolio decisions, with similar mathematical tools as before. Comparisons between the investor's expected utility of wealth and the utility of having the money invested in the risk-free investment suggests that, in some cases, the investor is paying more to the manager than the return he is receiving for having invested in the hedge fund, compared to a risk-free investment. For that reason we propose a strategic game where the manager's action is to allocate the money between the two assets and the investor's action is to add money to the fund when he expects profit. The result is that the investor profits from the option to reinvest in the fund, although in some extreme cases the actions of the manager make the investor receive a negative value for having the option.

Pervious academic researches point out that there are two-way effects in the relationship between fund return performance and cash flows. The preceding fund return performance would attract net cash flows and cash flows would adversely affect the succeeding fund return performance. This paper tries to verify that whether these effects exist in Taiwan and examine these effects in more details. The results are partly consistent with pervious literatures. In our sample, we find that fund return performance positive influences both cash inflows and outflows and cash flows do affect succeeding return performance.