There are many different kinds of financial investments that a person can make. One category of investment is private equity and private equity funds. Learning about private equity will help you decide if private equity investing is the right choice for you.
Private Equity Defined
There are two different parts to private equity. First, equity is the value of an asset minus the value of any liabilities (debts) that are associated with it. A private asset, or company, is one that isn’t freely traded in the public stock exchange. Therefore, investing in private equity is actually financing private businesses through means other than public sale of stock or bonds.
Investing in Private Equity
Some individuals are wealthy enough by themselves to invest in private equity, but more often a group of investors come together and form a private equity fund. The fund manager then chooses companies to invest in. Investors may use a variety of different strategies to invest, including angel investing, venture capital and growth capital, mezzanine capital, and leveraged buyouts. All of these strategies are long-term investments that generally will not be profitable for three to eight years.