(FINANCE) business entity formed to pool
money provided by investors in order to buy majority stakes in existing companies. A
common practice is to then "take the company private," so that it no longer has shares trading on the stock market. The company is then restructured, so that it has entirely different management practices, or a different business strategy. Afterward, the PE fund
will most likely re-sell the company on the stock market in a sponsored IPO.
Private equity funds are usually limited liability partnerships (LLPs), which gives them
special privileges of nondisclosure; most are organized in the State of
Delaware. PEF'
s have sponsors, or "principals," who are responsible for organizing the fund and recruiting other investors.
Among the best-known PE funds are Blackstone Group*, Kohlberg Kravis Roberts (KKR)*, Goldman Sachs Capital Partners*, Carlyle Group, Permira, Apollo Management,
Providence Equity, TPG Capital, Warburg Pincus, and Cerberus. Companies marked with an asterisk (*) are publically listed corporations; most PE funds are pivately managed. The selection above includes the largest ones by capital under management.
The private equity fund first appeared in the 1970's as a result of changes to ERISA. Institutional investors, usually pension funds, could be
legal partners in an LLP; they also required a place to park assets with very high rates of return.
In the
USA, PE funds have
long been sinecures for the most powerful political dynasties: the Rockefellers, the Romneys, the Bushes, and others.
