“Deep-pocketed investors often set aside money to buy into private equity funds. Such investments tend to be riskier but can generate higher returns than stocks or bonds. Here are some of the key players and terms in the world of private equity investments.
- Private equity firms: A broad category. It includes venture capitalists and buyout specialists who raise money from limited partners and use it to help companies develop products and markets.
- Limited partners: Investors in venture capital or buyout funds. These are typically pension funds, foundations, university endowments, insurance companies, or wealthy individuals.
- Venture capital firms: Firms that use their investment funds to finance start-ups, often in their early stages and typically in the technology, life sciences, or telecommunications fields.
- Buyout firms: They usually raise larger funds and invest them in more mature, later-stage companies of all kinds, often taking controlling interests and sometimes buying the companies outright. (The terms “private equity” and “buyouts” are often used interchangeably.)”
Source: Robert Weisman, in an article from The Boston Globe