Alternatives Unlocked: Private Equity

Unlocking Private Equity



Investing in Private Companies

Private equity strategies generally involve investing in companies that are not publicly traded on stock exchanges. Private equity fund managers (also known as general partners or GPs) often seek to generate returns by enhancing the performance of their portfolio companies over the course of their holding period. Some of the steps that private equity fund managers take to do so include:

1. Strengthening the management team

2. Acquiring new businesses to help improve operations and/or access new markets

3. Shaping business strategy to position the company for future growth

4. Developing and launching new products

5. Streamlining and improving operations

6. Optimizing capital structure (the amount of debt and equity a company has)

Common Private Equity Strategies

Below are three common private equity strategies, each with unique risk and return characteristics.

A review of different private equity strategies
A review of different private equity strategies


Private Equity Investments Typically Seek to Deliver...



Private Equity Funds: Exploring the Basics


Understanding Private Equity Fund Fees

A distribution waterfall lays down the rules and procedures for the distribution of profits in a private equity investment agreement. The goal is to protect the interests of the investors and incentivize the general partner to maximize the returns of the fund. It derives its name from the cascading nature of its constituent tiers: Return of Capital, Preferred Return, and Profit Sharing Region (consisting of Catch-up and Carried Interest).



Total Proceeds ($1.2 Million) 

Total Proceeds ($1.2 Million)
For illustrative purposes only.
Total Proceeds ($1.2 Million)
For illustrative purposes only.

Evaluating Private Equity Fund Performance

Throughout the life cycle of a private equity investment, there are a few ways that investors can evaluate the performance of their investment. Multiple on Invested Capital (MOIC) and Internal Rate of Return (IRR) are two common metrics used to measure the performance of private equity funds. Both are an estimate at any point before capital is returned to investors. These metrics should not be viewed in isolation and should both be evaluated within the context of the other (as well as fees and expenses).


Evergreen Private Equity Structures

In addition to traditional private equity funds described above, the market also consists of newer, continuously offered private equity vehicles.  Although every structure* is different, some of the typical characteristics of evergreen private equity vehicles include: 

  • Potential to buy and sell more frequently (with restrictions)
  • No capital calls
  • Automatic reinvestment
  • Lower minimum purchase investments
  • No termination date  

*For example, 40 Act registered funds, 40 Act-exempt vehicles, BDCs, etc. 

Explore Continuing Education On-Demand
For Financial Professionals Only

Continuing Education: Introduction to Private Equity

An on demand webcast offering one hour of continuing education (CE) credits.

Explore Other Private Market Asset Classes
Dig deeper into three other private market asset classes to learn what they are, why they matter, and how they may fit within existing portfolios.
  • Private Infrastructure
    Private infrastructure entails the raising of private capital to fund the development of infrastructure, including the physical structures, facilities and systems required for economies and societies to function.
    Learn More
  • Private Real Estate
    Private real estate refers to investment in real estate properties that are privately owned and managed by individuals, partnerships, or private companies, rather than being publicly traded in the stock market.
    Learn More
  • Private Credit
    Private credit consists of investment in privately negotiated loans issued from non-bank lenders to middle market companies that are typically not publicly traded.
    Learn More