Now we know everything about closed-end funds, and we’ve learned that the mechanism of a private equity is much more complicated than what we learned in the very beginning of the course when we said a private equity investor is a financial institution investing in companies which are not listed in the stock exchange. This story is much more complicated because we have investors putting their money into a fund and the fund is managed by an asset management company, And investors put in their money because they trust the capability of the asset management company to run private equity investments. However closed-end funds, even if they are the major vehicle in Europe, are not the only vehicle, are not the only legal entity we can use in Europe to be considered eligible as a private equity investor, because we also have banks and investment firms. Let's start with banks. Banks are allowed to invest directly in private equity as in Europe banks are universal, that means they can invest in any kind of financial assets. However, it's a bit uncommon that a bank invests directly in private equity, because the traditional way for bank to be active in the private equity world is to have an AMC or to invest in a closed-end fund. And obviously if a bank owns an AMC, the bank does it because the bank wants to have the carried interest as a gain and bank invests in a closed-end fund because it wants to receive a capital gain at the end. However, we must understand why it's uncommon that a bank invests directly in private equity. It’s uncommon for two reasons. The first one is that when banks invest as to calculate regulatory capital accordingly with Basel II and Basel III regulations, and when a bank invest in private equity the amount of regulatory capital is very high. Since the amount of regulatory capital is very high, it means that even if the bank generates capital gain, the most relevant part of this capital gain are cancelled by the cost of regulatory capital the bank has to calculate for. The other reason is that banks investing directly in private equity have to be compliant with a lot of limits and constraints fixed by law that make it very difficult to have a relevant portion of shares of a company directly managed by a bank. However, it happens that a bank invests directly in private equity or because the bank wants to invest in a trophy company, that means in very relevant company, or a bank invests directly to save a company that is relevant for a certain area or for a certain account. But however, considering the percentage direct investing of banks is honestly marginal. The other player, the other legal entity is represented by investment firms. What are investment firms? Investment firms accordingly with the banking directive are financial institutions. They can do the same activity of a bank with the exception of the possibility to collect money through deposits. For this reason, investment firms can directly invest in private equity. As an outcome of this fact, the mechanism of an investment firm is simple. On the liability side, we have equity of the shareholders, we have debts. On the asset side, we have cash collected through debt and equity, and this amount of cash can be invested in private equity. However, as you know, in private equity, we need two groups of people. We need people managing like an AMC, and we have people investing, like in a closed-end fund. To replicate this concept in an investment firm, we must have two groups of shareholders. A-shareholders, that means shareholders managing the investment firm, and they more or less do the same job of an AMC, and B-shareholders that means the shareholders that cannot manage a company but they simply invest more or less like investors in a closed-end fund. In term of remuneration, A-shareholders, every year, will receive a management fee but they will also receive a carried interest every year, because the investment firm is not a fund with an end but an investment firm is a financial institution. And for this reason we have to calculate the carried interest every year. B-shareholders will receive the difference between the amount of profit and the amount of carried interest which is given to A-shareholders. To conclude, it's very important to highlight that investment firms are used by two different groups of investors. On one hand, investment firms will be used by investors they want to leverage because an investment firm can do that. In a closed-end fund, if you remember, they cannot leverage. The other group of investors are typically a small group of investors that want to create their captive vehicle and for this reason they don't want to have the constraints of regulation coming from a closed-end fund, but they want simply to create their vehicle to invest their money in private equity. This is quite common and for example, we have many examples all around Europe of family offices. This means investment firms created by two or three members of a family willing to invest and to manage their own money directly.