What is Private Equity (PE)?
Private equity (PE) is an asset class that invests in privately held companies — most often through buyouts, growth equity, or venture capital. PE funds raise capital from limited partners and seek to improve and exit portfolio companies for a profit.
Private equity encompasses a range of strategies that invest in companies not traded on public exchanges. The most common PE strategy is the leveraged buyout (LBO), in which a fund acquires a controlling stake using a combination of equity and debt, improves the business, and sells it several years later.
PE is one of the largest alternative asset classes. The primary investors (LPs) include pension funds, sovereign wealth funds, insurance companies, endowments, and family offices, all attracted by historically higher returns than public equities in exchange for illiquidity.
Also known as: PE, buyout