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PE as an asset class continues to grow and evolve, both in developed and emerging markets. Business operators the world over – from entrepreneurs looking for start-up funding, to SME business owners with global ambitions, to management teams interested in buying out a corporate division – often find the right partner in PE funds to invest in their ambitions. As a result, PE is deeply entrenched in the economic model and will remain an important driver of business transformation globally.

KEY LEARNING POINTS

● PE is a simple business – buy a stake in a company (minority or majority), improve the business and sell it after a (limited) holding period.

● The preferred method employed by PE firms is to raise and invest individual funds, which they manage on behalf of investors (LPs). PE funds are typically structured as closed-end limited partnerships that require investors to commit capital for a period of 10 years or more.

● PE funds differ from traditional asset classes due to their illiquidity and the unpredictable cash flows generated from their investments.

● Both the fee structure and profit sharing arrangements in PE ensure alignment of interest; incentives change as the funds mature.