A starting point for understanding how private equity is structured, where value may come from and which questions matter.
Acquiring a controlling position in an established company. Debt may form part of the financing.
Examine: Cash conversion, debt capacity, entry valuation and the operational plan.
Risk: Leverage magnifies losses as well as gains; refinancing may become more difficult.
Capital to help a business expand, commonly without a full change of control.
Examine: Unit economics, expansion milestones, governance and dilution.
Risk: Growth assumptions may fail; minority investors may have limited control.
Equity financing for earlier-stage businesses with uncertain commercial outcomes.
Examine: Product-market fit, runway, follow-on capital and ownership dilution.
Risk: High failure rates and highly uneven outcomes; long holding periods.
Purchases of existing fund interests or interests in continuation vehicles.
Examine: Reference NAV date, transfer terms, unfunded commitments and conflicts.
Risk: Reported NAV can be stale; discounts alone do not establish attractive value.
Investing alongside a lead manager in a specific company or transaction.
Examine: Independent diligence, allocation rights, fees and concentration.
Risk: A narrower portfolio may concentrate exposure; access is not a substitute for underwriting.
A portfolio of fund commitments selected and managed by an intermediary.
Examine: Manager selection, portfolio overlap, fee layers and cash-flow pacing.
Risk: Additional costs and long durations can affect investor outcomes.
A limited partner agrees to provide capital, subject to fund terms.
The manager calls capital for investments, fees and other permitted costs.
Portfolio companies pursue operating, strategic or financing changes.
Exits or other cash flows may produce distributions. Timing and outcomes vary.
Promised capital and capital already contributed are different. Remaining commitments can be called later.
Residual value reflects estimates. DPI tracks distributions relative to paid-in capital.
A multiple does not capture timing. Cash-flow dates matter when assessing performance.
Educational overview. Structures and terms vary by vehicle and jurisdiction. See the ILPA glossary for industry terminology.