What is private equity?

Private equity (PE) is the provision of medium- to long-term finance to companies (targets) which exhibit the potential for growth in return for the investor acquiring an equity stake (ie shares). Target companies subject to a PE investment can be private or quoted on an exchange such as the London Stock Exchange, but in general terms PE funds tend to target private rather than quoted or listed companies.

Investors investing in PE funds or PE companies tend to be institutional investors such as pension funds, high-net-worth individuals, endowments, insurance companies and funds of funds. Pension funds constitute the largest category of investors in private equity funds, and the largest proportion of funds raised are buy-out funds. Ultimately many of