What is a Private Equity Fund?  

The fund within a private equity firm is a pooled investment vehicle that is used for raising and distribution of funds.  Funds are established with specific operating documents which specify both the economics and the administration of the fund.  Funds are sometimes focused on specific strategies, whether it be by vertical, or by “size of check”, or by stage of company.  Many VC firms, for example, have “venture funds” – investing in earlier stage companies, as well as “growth funds” – investing in later stage companies.   

Funds typically have a life cycle and often times funds must be fully invested by a specific date, or any left-over money is returned to investors.  PEs can have multiple funds operating at any given time and typically when a given fund is near the end of it’s lifecycle a new fund will be raised.  PE firms find it more or less easy to raise new funds based on the performance of its older funds.

Who Invests in Private Equity? How do Private Equity Firms raise Funds?  

Private equity raises funds through investors called limited partners which can be pension funds, institutional accounts, and wealthy individuals.