Private equity is the practice of investing in private companies 📈

Professional investors team up to create Private Equity firms (PE firms) that specifically invest in private companies 💼

But why would investors choose to invest in private companies instead of public companies?

Investors put money into private companies for the hope of achieving higher returns than via the stock market 🚀

We’ll learn later exactly how they do this.

Just like hedge funds, PE firms pool, or collect money, from organizations and individuals, like pension funds, family offices and wealthy people 💰

The job of PE firms is to invest this money into private companies, and then hopefully deliver a return over time.

PE firms not only invest in companies – buying slices of companies – but also acquire entire companies 🥧

PE firms charge management fees (usually 2% of their AUM) and a share of the profits that they ultimately make (typically 20% of the return) 💸

Although you can’t directly invest in private companies yourself, many large PE firms like Blackstone and KKR are actually public companies, so you can invest in them on Bloom!