What is a private equity fund and how does it operate?

A private equity fund is a collective investment vehicle that pools capital from highnetworth individuals, institutional investors, and other accredited investors to invest in private companies. The fund is managed by a private equity firm, which makes investment decisions on behalf of the investors.

Private equity funds typically have a fixed lifespan of 10 years, during which the fund manager invests the capital raised in private companies with the aim of generating high returns for the investors. The fund manager may invest in a variety of industries and types of companies, such as startups, growthstage companies, or mature companies that need restructuring or a turnaround.

Private equity funds operate on a "two and twenty" fee structure, which means that the fund manager charges a management fee of 2% of the committed capital, and a performance fee of 20% of the profits earned on the investments. The fund manager is incentivized to generate high returns for the investors, as they will receive a share of the profits.

Investors in private equity funds typically have limited liquidity, as their capital is locked up for the duration of the fund's lifespan. However, private equity funds can offer the potential for high returns, as the investments are typically not subject to the same level of regulation and scrutiny as public companies.