what is private equity

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 buy companies and overhaul them to earn a profit when the business is sold again. In a typical private equity deal, an investor buys a stake in a private company with the hope of ultimately realizing an increase in the value of that stake. Private equity is often grouped with venture capital and hedge funds as an alternative investment. Private equity funds may acquire private companies or public ones in their entirety, or invest in such buyouts as part of a consortium. Private equity is ownership or interest in an entity that is not publicly listed or traded. Private equity funds are similar to mutual funds or hedge funds, where the adviser pools together the money invested in the fund by investors. Private equity investments are made into mature companies that are looking to expand, restructure, or turn around their operations.