Private Equity Investment

904 WordsFeb 20, 20184 Pages
Private Equity (PE) investment is an asset class that is bought and sold in a privately negotiated transaction and is not publicly traded on a stock exchange. This investment is normally completed by private equity firm, venture capital firm, or an informal investor named business angel. They raise funds and invest it on behalf of their investors. There are four most well-known investment strategies, i.e. venture capital (VC), leveraged buy-out (LBO), mezzanine debt and distressed debt investments. It is distinguishable that VC usually targets the start-up firms while LBO purchases majority control in a developed and mature firm. The total global PE assets under management (AUM) in 2013 has climbed up to $3,466 billion, the highest value to date and has remained a steadily growth throughout the past 6 years after financial crisis (Appendix figure 1). This is partially attributed to a sharp decline of exit activity resulted from crisis, led to more capital calls, improved fundraising and thus expansion of AUM. Between 1990 and 2008, capital committed in PE were growing at 20% compounding rate annually, with some acquired firms have become popular due to the popularity of PE, such as Domino’s Pizza and Toys “R”. However, following the financial crisis in 2008, the private equity industry has been confronting momentous challenges yet continuous to recover with signs of performance rebounding. It has been proved to outperform the public market over the long term. While it is
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