What is private equity?
Private equity is an investment asset class describing private investments in privately held (as opposed to publicly traded) companies. As an asset class, private equity investments are very illiquid; investment commitments have typical durations of 7 10 years.Private equity firms receive their investment capital from Limited Partners (LPs). These LPs are frequently pension funds, foundations, and endowments which have large amounts of capital to invest. Private equity is generally part of an LP’s overall investment strategy that may include real estate, bonds, and publicly traded company stock.The goal of every private equity firm is to generate a higher-than-market rate of return for its investors. The S&P 500 is a typical benchmark against which returns are measured. The private equity industry generates returns by investing in the stock of private companies and subsequently generating a capital gain on that stock when the company is sold or becomes publicly traded.A private equity
The term “private equity” refers to a range of investments that are not freely tradable on public stock markets. Private equity firms raise money for two types of funds: venture capital funds and buyout/growth funds, although in recent years, the distinction between venture capital and buyout/growth funds has blurred considerable. At its core, private equity is simple: PE firms establish funds that raise capital from investors — who are referred to as limited partners, or LPs. The private equity firms — known as general partners, or GPs — invest their own capital along with the capital raised from investors. They borrow additional funds from banks and other lenders. With the combination of equity and the borrowed funds, the general partners buy companies that they believe could achieve significantly greater growth and profitability with the right infusion of talent and capital. Private equity GPs typically hold companies for about five years, and then sell them, hoping to realize a gai
Private equity is an investment asset class describing private investments in privately held (as opposed to publicly traded) companies. As an asset class, private equity investments are very illiquid; investment commitments have typical durations of 7 10 years. Private equity firms receive their investment capital from Limited Partners (LPs). These LPs are frequently pension funds, foundations, and endowments which have large amounts of capital to invest. Private equity is generally part of an LP’s overall investment strategy that may include real estate, bonds, and publicly traded company stock. The goal of every private equity firm is to generate a higher-than-market rate of return for its investors. The S&P 500 is a typical benchmark against which returns are measured. The private equity industry generates returns by investing in the stock of private companies and subsequently generating a capital gain on that stock when the company is sold or becomes publicly traded. A private equi
