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Thomas J. Watson

Investment Dictionary


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Private Equity Fund

 

A private equity fund is a fund that invests in a stakes of non-listed companies (private equity). Investment in private equity funds is much different from investment in mutual funds. They are illiquid, riskier and less regulated by the state’s institutions. 

 

Mostly private equity funds are riskier investments because they use debt leverage for acquisitions of the assets and because of more complicated selling of such fund units. The entry to private equity funds is also more complicated because of higher entry investment amounts. Normally such funds are created by private equity companies, promises higher return than regular mutual funds and are suited for institutional or other large investors.

 

Managers of private equity fund try to acquire controlling stake of the company that faces difficulties or just at low price, then influence management decisions to maximize shareholders value, and sell it for strategic investor or get company’s shares listed on stock exchange and exit from the project.

 






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