What is Private Equity
Private equity is purchasing shares in privately-held companies, which are not traded on public stock exchanges.
Private Equity Funds
Funds are the primary gateway to private equity investing. Funds give investors the most suitable avenue for investing in privately-held companies. Traditional private equity funds are offered periodically while newer evergreen funds are continuously available.
In private equity fund investing, the investors are known as limited partners and benefit from the fund’s potential performance. The general partner is the manager of the fund and responsible for selecting, growing and selling the portfolio companies.
After a few years, once the company is more profitable, PE firms plan an exit. This means they sell their shares, either to other investors or back to the original owners, or take the company public through an Initial Public Offering (IPO). The profit generated is the return on investment for the investors.