Author: Gert-Tom Draisma / www.TristanFinance.com
First published: 24th of September 2026
Latest update: 28th of September 2026
THIS SECTION IS WORK IN PROGRESS
1. What is Private Equity?
Private equity is often defined simply as investment in companies that are not publicly traded. While technically useful, that definition does not explain what makes private equity economically distinctive.
Private equity is better understood as a form of long-term, negotiated and generally illiquid ownership in which investors commit capital to specialist managers who identify, acquire, finance, govern, develop and ultimately realise investments.
Each word matters.
Long-term because private investments generally cannot be entered and exited instantaneously.
Negotiated because there is ordinarily no public exchange determining the terms on which control of the asset changes hands.
Illiquid because there may be no readily available buyer when an investor wants to sell.
Ownership because private equity investors—particularly buyout funds—frequently obtain substantial influence or control rather than merely holding a small passive interest.
Specialist management because finding, evaluating, executing, financing, managing and exiting private investments requires considerable human and financial resources.
These characteristics distinguish private equity not only from public equities but also from many other forms of investment.
They also explain much of the economic architecture surrounding private equity funds: long fund lives, committed rather than immediately invested capital, extensive contractual arrangements between investors and managers, management fees and, ultimately, carried interest.
Private Equity for readers with little timePart I - Origins and historyPart II - What makes private equity differentPart III - The private equity fundPart IV - The Limited Partnership AgreementPart V - Commitments, Drawdowns and DistributionsPart VI - Illiquidity and transaction frictionPart VII - The J CurvePart VIII - How value is createdPart IX - Leverage and capital structurePart X - Measuring performancePart XI - Risks and failed investmentsPart XII - GP/LP alignmentPart XIII - From private equity to carried interestNeed assistance with your Carried Interest Challenges? Reach out to us:
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