Private Equity Fundamentals

Definition: Private equity (PE) firms invest in private companies, with the goal of eventually selling them for a profit.
Types:
- Venture capital: Invests in startups and early-stage companies.
- Growth capital: Invests in established companies looking to expand.
- Leveraged buyouts (LBOs): Uses debt to finance the acquisition of a company.
Key characteristics:
- Illiquidity: PE investments are typically long-term and illiquid.
- Active management: PE firms often take an active role in guiding the companies they invest in.
- High potential returns: PE investments can offer high returns, but also come with higher risks.

Definition: Hedge funds are investment vehicles that pool money from high-net-worth individuals and institutional investors to invest in a variety of assets.
Strategies:
- Long/short equity: Buys undervalued stocks and sells short overvalued ones.
- Global macro: Makes bets on macroeconomic trends and events.
- Event-driven: Invests in companies undergoing significant events, such as mergers or bankruptcies.
Key characteristics:
- Flexibility: Hedge funds can invest in a wide range of assets and strategies.
- Absolute return: Hedge funds aim to generate positive returns regardless of market conditions.
- High fees: Hedge funds typically charge high fees to investors.

Definition: Real estate investments involve buying, owning, and managing property to generate income and capital appreciation.
Types:
- Direct property investment: Buying and owning physical properties.
- Indirect property investment: Investing in real estate investment trusts (REITs) or real estate mutual funds.
Key characteristics:
- Income generation: Real estate investments can provide rental income and capital appreciation.
- Diversification: Real estate can provide a diversification benefit to a portfolio.
- Illiquidity: Real estate investments can be illiquid, making it difficult to quickly sell assets.

Definition: Commodities are physical goods or resources that are traded on markets, such as oil, gold, and agricultural products.
Types:
- Hard commodities: Natural resources, such as metals and energy products.
- Soft commodities: Agricultural products, such as wheat and coffee.
Key characteristics:
- Cyclical: Commodity prices can be affected by supply and demand cycles.
- Volatile: Commodity prices can be highly volatile, making them a high-risk investment.
- Diversification: Commodities can provide a diversification benefit to a portfolio, as their performance is often uncorrelated with other asset classes.

Private equity firms invest in private companies with the goal of eventually selling them for a profit.
Venture capital invests in startups and early-stage companies, providing financing to help them grow.
Growth capital invests in established companies looking to expand, providing financing for business expansion.
Leveraged buyouts (LBOs) use debt to finance the acquisition of a company, often to restructure and resell.
Private equity investments are typically long-term and illiquid, making it difficult to quickly sell assets.
Private equity firms often take an active role in guiding the companies they invest in, influencing company decisions and operations.
Private equity investments can offer high returns, but also come with higher risks due to the illiquidity and potential for company performance issues.

Hedge funds are investment vehicles that pool money from high-net-worth individuals and institutional investors to invest in a variety of assets.
Long/short equity strategies involve buying undervalued stocks and selling short overvalued ones to generate profits.
Global macro strategies make bets on macroeconomic trends and events, such as changes in interest rates or currency fluctuations.
Event-driven strategies invest in companies undergoing significant events, such as mergers, acquisitions, or bankruptcies.
Hedge funds can invest in a wide range of assets and strategies, allowing for flexibility and diversification.
Hedge funds aim to generate positive returns regardless of market conditions, focusing on absolute return rather than relative performance.
Hedge funds typically charge high fees to investors, which can eat into returns.

Real estate investments involve buying, owning, and managing property to generate income and capital appreciation.
Direct property investment involves buying and owning physical properties, such as office buildings or apartments.
Indirect property investment involves investing in real estate investment trusts (REITs) or real estate mutual funds, providing exposure to real estate without direct ownership.
Real estate investments can provide rental income and capital appreciation, offering a regular stream of returns.
Real estate can provide a diversification benefit to a portfolio, as property values and rental income are often uncorrelated with other asset classes.
Real estate investments can be illiquid, making it difficult to quickly sell assets.

Commodities are physical goods or resources that are traded on markets, such as oil, gold, and agricultural products.
Hard commodities include natural resources, such as metals and energy products, which are often subject to supply and demand cycles.
Soft commodities include agricultural products, such as wheat and coffee, which are often affected by weather and seasonal patterns.
Commodity prices can be affected by supply and demand cycles, leading to fluctuations in value.
Commodity prices can be highly volatile, making them a high-risk investment.
Commodities can provide a diversification benefit to a portfolio, as their performance is often uncorrelated with other asset classes.