Know The 9 Types Of Private Equity

Know The 9 Types of Private Equity Simply Explained

Know the 9 types of private equity Simply Explained. Private equity is money invested into companies that are not publicly traded. PE investments offer a broad range of opportunities. Investors can invest in promising start-ups or revitalize a struggling brand. Equity appeals to investors looking to earn better returns than what can be achieved through investing in stocks.

Private equity funds are considered “alternative” investing opportunities compared to buying stocks or real estate properties and other assets that have long-term growth potential. Learn more about the nine types of PE funds below.

Nine types of private equity

1. Leveraged Buyout (LBO) A leveraged buyout fund strategy combines investment funds with borrowed money. Basically, the purpose of the fund is to buy companies and make them profitable.

2. Venture Capital (VC) Venture capital deals with funding early-stage start-ups and new businesses. Also, venture capitalists invest in companies that they believe have high growth potential.

3. Growth Basically, growth capital invests in mature companies looking to grow their business by entering new markets or buying other companies.

4. Real Estate Private Equity (REPE) Also, the real estate PE funds invest in properties using different strategies. Also, the funds invest in land or speculative development deals and are used to buy, develop, and operate properties.

5. Infrastructure The infrastructure businesses are stable and generally operate for decades. Basically, the businesses like airports and utility companies have monopolies in their services, which makes them incredibly valuable.

6. Fund of Funds A private equity fund of funds raises capital from investors but doesn’t invest in private companies or assets. Instead, it acts as an investor and buys into a portfolio of other equity funds.

7. Mezzanine Capital Mezzanine capital is halfway between debt financing and raising equity capital. Companies typically use it to raise funds for specific projects. This type of equity is a hybrid form of financing that aims to earn a higher rate of return than debt and carry a lower risk than equity financing.

8. Distressed Private Equity Distressed PE funds, as special situations, specialize in lending to companies in financial crises; their purpose is to take control of the business during the bankruptcy or restructuring processes so they can buy the company at a lower purchase price.

9. Secondaries: The secondary funds, the secondary market, exist to buy investments committed in a fund. If an investment hasn’t reached the harvesting period but an investor needs or wants to take their money out, the only way to do that is to sell through the secondary market.