Glossary · from the DESK dictionary
Private Equity
Investment in privately held (non-listed) companies, usually aiming to increase their value through operational improvements before a profitable exit.
In plain words
Whole companies (rather than individual shares) are bought, improved over several years, and then sold on.
In more detail
Private equity denotes equity stakes in unlisted companies held through closed-end funds. There are three sources of return: operational improvement, leverage and multiple change. Empirically a substantial part of the historical return came from the latter two — from falling rates and rising multiples, neither of which can be repeated.
Example
A fund returns 2.4 times capital. Attribution shows 0.5 from operational improvement, 0.6 from leverage and 1.3 from a higher exit multiple.
What it means for traders
A significant alternative asset class, increasingly accessible to wealthy private investors as well.
Common pitfalls
Very low liquidity — capital is often locked up for 5-10 years, with no way to exit early.
Related terms
Accredited Investor · Alternative Asset · Business Development Company (BDC) · Buyout · Carried Interest · Distribution Waterfall · Dry Powder · Equity Co-Investment · Exit Strategy · J Curve · Leveraged Buyout (LBO) · Venture Capital
From the DESK dictionary. For information only, not investment advice.
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DESK is a research tool and not investment advice. Page generated: 2026-10-12.