Investment Banks and Pre-IPO Investments

Many bulge-bracket investment banks offer private wealth clients the opportunity to invest in funds managed by a bank that in turn invest in hot private companies (such as Groupon and Zynga) prior to the initial public offering.  Andrew Ross Sorkin recently posted an article on NY Times DealBook that discusses how investment banks can profit from these types of investments.  Essentially, through these bank-managed fund investments, the banks already have an investor relationship with the company, which may help secure a lead manager role in the company's IPO.  Interesting article worth a read.  Here's the link:  http://dealbook.nytimes.com/2011/12/19/two-ways-for-banks-to-win/