Private equity is an investment strategy where capital investment is made into private companies -- those that are not publicly traded.
Away from the public market, institutional and retail investors can directly invest in both new and mature businesses, giving them funds that can be used for modern technologies, bolster the balance sheet or make acquisitions to expand the business.
This investment is made in exchange for a stake in the business (equity), which in most cases is a majority share.
Private equity portfolios are funded by high-net-worth individuals and businesses, with the minimum amount to join a fund varying from just $250,000 up into the millions. The fund is a pool of money that is invested into several businesses, forming a portfolio of investments.
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