Private equity generally describes any investment strategy that involves the purchase of equity in a private company. Along with buyouts, these strategies include venture & growth, special situations and generalist investments.

Private Equity Funds
Private equity funds invest predominantly in private companies and tend to be set up as limited partnerships with a fixed duration of typically 10 or more years. The manager of the private equity fund actively helps the companies in which it invests to restructure, develop and grow profitably. This usually involves taking a seat on the board and providing a range of assistance, including strategic advice particularly on capital markets and financing, market analysis, networking and sourcing additional management.

Key Advantages of Private Equity

Long-term Investment Horizons: Private equity managers tend to have long-term investment horizons of four to six years or longer. This allows them to be patient in creating value within their portfolio companies, and also allows them to maximise returns by realising the investments at advantageous points in the economic cycle.

Active Management: Private equity funds generally tend to take larger stakes in companies relative to investors in listed companies. Consequently private equity funds tend to exercise more influence over their investments, allowing them to add value and drive performance via an active management approach.

Inefficient Market: Private equity transactions are negotiated based upon private information. This means that the private equity market is relatively inefficient, which creates the potential for good, experienced investors to achieve attractive returns.