What is private equity

Traditional private equity funds have very high minimum investment requirements, potentially ranging from a few hundred thousand to several million dollars. As such, most private equity investing is reserved for institutional investors (such as pension funds or private equity firms) or high-net-worth individuals. Let’s say you invest $1 million through a private equity firm (traditional private equity funds typically have very high minimum investments). The private equity firm would put your money in a private equity fund along with money from other investors and invest the pool of money in various private equity instruments, such as buyouts or venture capital (more on those below). Investors turn to private equity to diversify their holdings and aim for higher returns than the public market might provide. One key distinction to consider before investing is that private equity valuations are not influenced by the larger market. Whereas publicly traded companies must adhere to strict accounting practices set in place by the Securities and Exchange Commission, private companies are allowed more flexibility. So, while private equity funds certainly come with higher risk, historically, they have resulted in higher returns. According to the Bain & Company Global Private Equity Report 2023, private market returns have outpaced public market returns over every time horizon [0] When you invest in a private equity fund, you can think of yourself as a secondary investor, or in offic...

Private equity is one of the most potent forces in the world of finance. PE firms buy companies and participate actively in their businesses to help them grow and achieve their full potential. These investment firms operate in some of the most dynamic sectors in the economy, particularly technology, and they foster innovation that has a deep impact across the economy. The U.S. dominates the private equity industry globally, and private equity firms control more than $6 trillion in assets in the U.S. The following list ranks the top ten U.S.-based private equity firms based on assets under management as of the end of the first quarter of 2023. Blackstone is the world’s largest alternative asset manager, founded in 1985 to focus on mergers and acquisitions by Lehman Brothers alumni Peter Peterson and Stephen Schwarzman. The firm serves institutions and individuals, working on a large scale that enables them to invest in dynamic sectors with strong potential for long-term growth. Blackstone, with more than 12,000 real estate assets and over 230 portfolio companies, deploys capital into investments that they are convinced will deliver long-term value for clients. Blackstone has been one of the largest investors in leveraged buyouts over the past three decades, and the company is active in credit, infrastructure, hedge funds, insurance, secondaries and growth equity. Apollo Global Management is a leading global alternative investment manager with expertise in credit and real as...

• Private equity funds are closed-end funds that are not listed on public exchanges. • Their fees include both management and performance fees. • Private equity fund partners are called general partners, and investors or limited partners. • The limited partnership agreement outlines the amount of risk each party takes along with the duration of the fund. • Limited partners are liable for up to the full amount of money they invest, while general partners are fully liable to the market. Private Equity Fund Basics Those who want to better understand the structure of a private equity fund should recognize two classifications of fund participation. First, the private equity fund’s partners are known as general partners. Under the structure of each fund, GPs are given the right to manage the private equity fund and to pick which investments they will include in their portfolios. GPs are also responsible for attaining capital commitments from investors known as One of the most lucrative PE exits in 2020 came from Providence Equity's sale of their stake in Zenimax Media, the parent company of Bethesda Softworks, a game developer. The firm sold its stake, which it acquired in 2007, to Microsoft for $7.5 billion, not bad considering their initial investment was just $300 million. The LPA traditionally outlines management fees for general partners of the fund. It's common for private equity funds to require an annual fee of 2% of capital invested to pay for firm salaries, deal sourci...

Private Equity is one of the most vaunted types of work in finance. PE interviews are notorious for difficult questions, so we have developed a private equity interview prep pack ( The typical route into private equity is after having spent 2 years at a top investment bank and/or completing an MBA at a top business school. For an excellent insight into the Private Equity world, read "Barbarians at the Gate" which details the LBO of R.J.R. Nabisco by KKR in the 1980s. What Is Private Equity? Private Equity is not very well known outside of the finance world, but it is one of the key players in global business. Private Equity firms are part of the fabled 'buy-side' and some of the largest firms (megafunds) are: • Kohlberg, Kravis & Roberts (KKR) • Blackstone • Bain Capital • Carlyle Group Private Equity Definition The definition of private equity is simply money invested into a private company, or the privatization of a company through the investment of outside money. Basically, what private equity firms attempt to do is to invest into a company, take a majority stake, improve the company and then exit their investment at a large profit. In order to magnify returns, PE firms make use of leverage (borrowed money) to conduct Leveraged Buyouts (LBOs). Private Equity firms can either focus on a specific sector (Energy, Technology, Healthcare etc.) or operate across a broad spectrum. The larger the firm, the more likely it is to cover more sectors. How Do Private Equity Firms Wor...