A private equity firm will typically form a limited partnership with managers as general partners and investors as limited partners where the latter only risk the amounts invested. These funds are limited to wealthy investors since significant investment is required, and it is often tied up for years.
Moreover, these funds are not traded on stock exchanges unless the private equity firm sales its shares to the public. Then, the investors become the shareholders in a firm rather than stakeholders in a specific fund it manages.
One way to profit for a private-equity investor is by gaining access to profits the firm makes as one of the limited partners. The other way is by buying shares in a private equity fund. Some of the biggest private equity firms that are publicly traded include Blackstone Group and Kohlberg Kravis Roberts (KKR).
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With private equity funds, investments are often locked for years
Private Equity Funds are alternative investments and differ substantially from other investment funds.