Private equity investment—firms and funds
Private equity investment—firms and funds

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Private equity investment—firms and funds
  • Private equity firms
  • Fund structure
  • Specialist funds

A private equity fund is a pooled investment vehicle.

Funds are formed and managed by private equity firms who in turn invest the capital of those funds into private companies (whose securities are not publicly traded on a stock exchange) by way of the acquisition of existing issued securities or the subscription of newly issued securities.

Private equity firms

What is a private equity firm?

In broad terms, a private equity firm is a group of investment specialists who invest and manage capital provided by external investors to funds formed by the firm for private equity investment purposes.

Private equity firms are typically classified as either independent or captive.

Independent firms are generally established and owned by the people who work within them (usually senior personnel) and will manage a number of funds with capital raised from a variety of investors, such as insurance companies, pension funds and high net worth individuals.

Captive firms are generally part of large institutions such as banks, insurance companies and pension funds, and will invest capital provided to them by the institution. On occasion these firms may be permitted to raise capital from external sources.

What is a private equity investment?

There are three broad categories of private equity investment:

  1. venture capital (see Practice Note: Venture capital investment)

  2. buyout capital (see Practice Notes: Buyouts and Buyouts—documentation), and

  3. development or