Private equity definition

What does Private equity mean?

Equity-related capital used to finance change in an unquoted (ie non-public) company. Private equity is an investment in shares which are not quoted on the stock exchange, and are therefore less marketable (and liquid) that public equity (ie quoted shares).

Due to the perceived lack of transparency (corporate governance rules do not apply to private companies) and because the investments are often highly geared (ie they use the company's own money or borrowings to carry out the deal), there has been heavy criticism in the press – and employers that are funded with private equity may be less financially stable than publicly quoted companies, because of the level of borrowings. This means they may be less likely to be able to fund the pension scheme.

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