An investment vehicle that pools the funds received from all its private equity (PE) investors for the purpose of investing. A private equity fund is managed by a general partner (GP)- i.e., normally the private equity firm that created the fund.

A private equity fund invests in companies and businesses that aren’t listed on a public stock exchange (unlisted companies). As a structure, the fund is an advisor/ manager and a legally separate entity whose performance is mainly determined by the quality of its management and investments. In other words, private equity funds play an active role in the underlying venues in a bid to create value.

By nature, private equity is illiquid and involving more complexity vis-à-vis investing in publicly held companies‘ shares, but this entails a different set of risks and corresponding returns. Investors (holders of private equity shares) are poised to earn excess returns over the long term compared to certain active market venues.

In certain countries, e.g., the United States, private equity funds are normally structured as limited partnerships- that is, investors in the funds are treated as limited partners and have to meet specific regulatory requirements to be able to enroll in the fund. The general partner (investment manager) of a fund runs its investments and renders advisory services to other partners.