Private equity is an alternative form of private financing, away from public markets, in which funds and investors directly invest in companies or engage in buyouts of such companies. Private equity firms make money by charging management and performance fees from investors in a fund.
How does private equity work?
To invest in a company, private equity investors raise pools of capital from limited partners to form a fund—also known as a private equity fund. Once they’ve hit their fundraising goal, they close the fund and invest that capital into promising companies.