What Is Private Equity

Overview *

Private equity consists of equity and debt investments in companies, infrastructure, real estate and other assets. Private equity firms seek to invest in quality assets at attractive valuations and use strategic, operational, and financial expertise to add value. After a suitable holding period, a private equity firm seeks to monetize its investment at a premium to its acquisition cost, generating positive returns for its investors.

Private equity firms raise capital from a variety of institutional and individual investors. These investors are called limited partners (LPs). The manager of a private equity fund, called the general partner (GP), invests the capital raised from LPs in private companies or other assets and manages those investments on behalf of the LPs. 

* Unless otherwise noted, the information presented herein represents Pomona’s general views and opinions of private equity as a strategy and the current state of the private equity market, and is not intended to be a complete or exhaustive description thereof.

 

What is Private Equity?

Below is a video further describing the private equity process.

Private Equity Structure

Structure

Private equity is often categorized as an "alternative investment", which typically denotes an asset class or strategy that is an alternative to the stock and bond portfolios traditionally used by investors. Below is a broad overview of asset classes and strategies that are considered alternative investments:

Alternative

Lifecycle of a Typical Private Equity Fund


Timeline

The information presented herein is for illustrative purposes. There is no guarantee whether expressed or implied that actual cash flow of any particular private equity fund will follow this pattern. Investments in private equity involve a substantial degree of risk, there is no guarantee that any investment in a Pomona-sponsored fund will ultimately be profitable and an investor could lose some or all of its investment.