Private equity

Private equity funds (PE funds) offer unique investment opportunities to high-net-worth and institutional investors. But anyone who wants to invest in a PE fund must first understand their structure so he or she is aware of the amount of time they will be required to invest, all associated management and performance fees, and the liabilities associated.

PE funds are closed-end funds that are not listed on public exchanges. Their fees include both management and performance fees. Private equity fund partners are called general partners, and investors or limited partners. The limited partnership agreement outlines the amount of risk each party takes along with the duration of the fund. Limited partners are liable up to the full amount of money they invest, while general partners are fully liable to the market.

Funds may consider purchasing stakes in private firms or public companies with the intention of de-listing the latter from public stock exchanges to take them private. After a certain period of time, the private equity fund generally divests its holdings through a number of options, including IPOs or sales to other private equity firms.