what is a private equity firm

Private equity is a type of investment fund that invests in and restructures private companies. Private equity firms operate these investment funds on behalf of institutional and accredited investors. Private equity firms may acquire private companies or public ones in their entirety, or invest in such buyouts as part of a consortium. They typically do not hold stakes in companies that remain listed on a stock exchange. Private equity funds aim to take control of a business for a relatively short time, restructure it, and resell the company at a profit. Private equity firms generally receive a return on their investment through a periodic management fee as well as a share in the profits earned from each private-equity fund managed. Private equity firms are skilled at selling businesses, by finding buyers willing to pay a good price, for financial or strategic reasons. Private equity is often grouped with venture capital and hedge funds as an alternative investment. Investors in this asset class are usually required to commit significant capital for years, which is why access to such investments is limited to institutions and individuals with high net worth.