Private Equity
Private equity is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange. The term "private equity fund" is often used as a reference to various types of investment companies (also called "funds") that invest deposited resources in companies as mentioned above. These funds typically invest in a number of various companies in different industries to achieve a diversification in comparison to investing in only one company.
Private equity is often referred to as active ownership since the fund's financial investment in a company is combined with active participation in the company's management and development. The investments made by private equity entail therefore not only access to capital, but also to other resources such as financial and industrial competence and networks.
Private Equity consists of the following main segments:
- Seed capital - Starting a business
- Venture capital - Developing products and markets
- Development capital - Growth investments
- Buy-out - Developing mature companies
The vast majority of those investing in private equity funds, called limited partners, are banks, pension funds, endowments, insurance companies and fund-of-funds.
Investments made by European private equity and venture capital firms amounted to €73.8 bn in 2007 of which €2.5bn of the investments were made by Norwegian private equity firms in 137 companies (source:EVCA).