What Are Private Equity Funds?

A private equity fund is an equity investment in an asset that cannot be bought and sold freely in the stock market. Private equity funds are established as limited partnerships. These private equity companies act as a general partner in the limited partnership. Individuals and investors are persuaded by the private equity companies to invest in the private equity fund. When the private equity fund company thinks that a particular investment guarantees good returns, it will advise the limited partner to invest money. The general partner takes charge of the investment portfolio while the limited partner supplies funds for the investment.

Major types of private equity are angel investment, venture capital, growth capital and leveraged buyout. Private equity funds put in money only in small or mid-cap companies. Funds channelised through private equity are beneficial for the growth of the industry, helpful for expanding working capital, crucial for profitability and a great way to obtain funds for small companies that are not able to procure grants and loans.

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