Private Real Estate
Asset class guide
EducationAsset class guide
Private Equity
Private equity funds collect commitments from investors and draw them down as they buy stakes in private companies.
Introduction to private equity
What you need to know
Structure
Closed-ended fund, or a vehicle for a single transaction.
Capital
Committed at the start, drawn down as investments are made.
Investors
Pensions, endowments, sovereign funds, family offices, private wealth.
Timing
A first close, then later closes up to a final close.
How is private equity capital raised?
Private equity capital is committed once and drawn over years.
Most private equity is raised through a closed-ended fund. Investors commit capital at the start, and the manager draws it down as investments are made.
The life of a fund
Commitment
Investors commit capital at the start.
Drawdown
The manager draws it down as investments are made over the investment period.
Return
Capital is returned to investors as companies are sold.
How does a fund close?
A fund is raised in closes. Later closes add investors until the final close, after which the fund takes no new commitments.
Closes, in order
First close
Brings in the anchor investors and allows the fund to begin investing.
Later closes
Add investors to the fund.
Final close
After it, the fund takes no new commitments.
Who invests in private equity?
Capital comes from pension funds, endowments, foundations, insurers, sovereign wealth funds, family offices and private wealth platforms. Many sponsors also raise for single transactions through co-investments and continuation vehicles.
- Pension funds
- Endowments
- Foundations
- Insurers
- Sovereign wealth funds
- Family offices
- Private wealth platforms
Who does the capital serve?
Private equity capital is invested in operating companies and in the people who work in them.
Its investors include pension funds, endowments, sovereign funds and family offices, each investing for someone else. A committee that commits to a fund is backing the plan for each company, and the people who will carry it out.
What do institutional allocators look at?
Allocators decide on evidence. We help you present it.
01
Team and attribution
Who sourced, led and sold each investment, and whether those people are still on the team. Allocators ask for results by deal, tied to named individuals.
02
Realised results
Allocators separate realised results from unrealised valuations, and look at how results vary across deals, vintages and market conditions.
03
Strategy and pipeline
Where the deals come from, why the manager wins them at a sensible price, and which transactions the early part of the fund is expected to finance.
04
Terms and alignment
How the fund terms compare with the market for the strategy, how much the general partner commits, and how conflicts of interest are handled.
Private Equity: the guide as a PDF
The same guide in print form, with the team and our contact details. For your own reading or to share with your partners.
Important information
For information only. This guide describes general practice in private equity fundraising, which varies between managers and allocators. It is not an offer or solicitation to buy or sell any security, and it is not investment, legal or tax advice.
