Private equity essentially is a source of capital for investing from institutions and high net worth individuals with the aim to get equity ownerships in company and for the purpose of investing. The partners and members of equity funds raise and manage the funds with the aim to get favorable return for their stake holders. The investment horizon in this usually varies from four to seven years.

The private equity funds are investment companies which do not hold any securities which are publicly traded and instead they look for equity stakes in private companies. This implies the securities of these companies are not traded in the securities market or to the general public. It is seen that many of these private equity funds have individual operations and they get their funds from pension funds, wealthy individuals and investment managers. Some are publicly traded entities whereas some are private companies. Some companies are also subsidiaries of bugger financial firms.

The investment horizons of the private equity funds are much longer when compared to publicly traded securities. The reasons for this are many and the main reason is that the securities that private companies issue are very illiquid as they are not traded. The chances that these can be sold to a third party are also less as there are regularity and contractual and restrictions also. Some funds are also partners and assist in the working and management of the company and do not act merely as passive investors. The private equity funding is a popular way of getting funds today especially for small startup firms getting loans for which is difficult and cumbersome.

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