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Private Equity

Private Equity

Private equity refers to the practice of investing in companies that are not publicly traded on a stock exchange. Private equity firms raise capital from a variety of sources, including pension funds, endowments, and wealthy individuals (angel investors). They use this capital to acquire and invest in private companies.

Private equity firms typically have a control-oriented approach to investing, and they often seek to actively manage and improve the companies they invest in. This can involve restructuring the company's operations, making changes to its management team, or implementing new business strategies. The goal of private equity firms is to generate strong returns for their investors by increasing the value of the companies they invest in and eventually selling them for a profit.

Private equity firms may also invest in publicly traded companies, but in these cases they typically take a private company approach to investing and seek to actively manage and improve the company. Venture Capital, a subsector of private equity, involves early-stage investing in brand-new, innovative companies to help them grow (think Mark Cuban and Shark Tank). Traditional private equity involves investing in more-established companies than venture capital.

Private equity analysts typically command an above average salary relative to other careers in the finance industry. There are several career paths that one can take to become a private equity professional:

  • One option is to start out in a related field such as investment banking or management consulting, and then transition into a private equity role after gaining some experience and building a strong network in the industry.
  • Another option is to start out in a more entry-level role at a private equity firm, such as an analyst or associate, and work your way up to a more senior position. This can involve getting an advanced degree in a relevant field, such as a Master's in Business Administration (MBA) or a Master's in Financial Economics, and gaining experience through internships or other job opportunities in the private equity industry.

To be successful in a private equity career, it is important to have strong analytical skills, the ability to think creatively and strategically, and the ability to communicate effectively with both colleagues and clients. It can also be helpful to have a deep understanding of financial markets and investment strategies. Networking and building relationships within the industry are also important for advancing in a private equity career.