Private equity

Abstract

The distinctive features of private equity are the object of this chapter. Different implementation strategies and different risk and return profiles depend on the stage of the company’s life cycle in which the private equity transactions take place. These aspects are examined in detail in the chapter, which provides an analysis of the different investment management strategies. The private equity asset class can be accessed directly, through participation in the equity of one or more companies, or indirectly, using various investment vehicles, each one with specific characteristics. Therefore, this chapter analyses private equity funds, special purpose acquisition companies (SPACs), private equity investment companies, other listed private equity vehicles, and exchange traded funds (ETFs) of the private equity asset class. The investment strategies typical of private equity are characterised by a finite time horizon, as they generally involve an established date by which the transaction should be completed through the sale of the shareholding. This asset class requires, therefore, the use of typical performance measures, which are illustrated in detail by this chapter. The peculiar risks of private equity and the phenomenon of discount-to-NAV in listed private equity investment vehicles are object of further examination.