Private equity funds
Produced in partnership with SNR Denton
Private equity funds

The following Financial Services guidance note Produced in partnership with SNR Denton provides comprehensive and up to date legal information covering:

  • Private equity funds
  • What is a private equity fund?
  • Types of PE funds
  • Principal structures—limited partnerships
  • Key terms of limited partnership agreements
  • Other key features of PE fund arrangements

What is a private equity fund?

A private equity fund (PE fund) is a collective investment vehicle that invests primarily in unlisted companies (or companies which are to be taken private). Opportunities to invest in such companies tend not to be publicised and are generally individually negotiated. Therefore, it is difficult for investors outside the private equity industry to gain direct exposure to these types of companies. However, pooling investments in a PE fund managed by a professional manager allows investors to gain exposure without needing to have the necessary expertise. At the same time, these vehicles provide capital to help unlisted companies to grow, to invest in securities which are transitioning from public to private trading or to invest in companies which are insolvent or facing financial difficulties but where restructuring or rationalisation activity could return the underlying company to profit.

PE funds will often take a significant or majority stake with a view to exercising management control. The aim will be to drive performance of the companies and to realise that performance by exiting the investment at an appropriate juncture.

PE funds can take a number of forms and the structure is primarily driven by tax considerations. In the UK, many PE funds are structured as limited partnerships. Funds will be actively managed and will have a