About Me
Chartered Financial Analyst (CFA)
1 Ethical and Professional Standards
1-1 Code of Ethics
1-2 Standards of Professional Conduct
1-3 Guidance for Standards I-VII
1-4 Introduction to the Global Investment Performance Standards (GIPS)
1-5 Application of the Code and Standards
2 Quantitative Methods
2-1 Time Value of Money
2-2 Discounted Cash Flow Applications
2-3 Statistical Concepts and Market Returns
2-4 Probability Concepts
2-5 Common Probability Distributions
2-6 Sampling and Estimation
2-7 Hypothesis Testing
2-8 Technical Analysis
3 Economics
3-1 Topics in Demand and Supply Analysis
3-2 The Firm and Market Structures
3-3 Aggregate Output, Prices, and Economic Growth
3-4 Understanding Business Cycles
3-5 Monetary and Fiscal Policy
3-6 International Trade and Capital Flows
3-7 Currency Exchange Rates
4 Financial Statement Analysis
4-1 Financial Reporting Mechanism
4-2 Income Statements, Balance Sheets, and Cash Flow Statements
4-3 Financial Reporting Standards
4-4 Analysis of Financial Statements
4-5 Inventories
4-6 Long-Lived Assets
4-7 Income Taxes
4-8 Non-Current (Long-term) Liabilities
4-9 Financial Reporting Quality
4-10 Financial Analysis Techniques
4-11 Evaluating Financial Reporting Quality
5 Corporate Finance
5-1 Capital Budgeting
5-2 Cost of Capital
5-3 Measures of Leverage
5-4 Dividends and Share Repurchases
5-5 Corporate Governance and ESG Considerations
6 Equity Investments
6-1 Market Organization and Structure
6-2 Security Market Indices
6-3 Overview of Equity Securities
6-4 Industry and Company Analysis
6-5 Equity Valuation: Concepts and Basic Tools
6-6 Equity Valuation: Applications and Processes
7 Fixed Income
7-1 Fixed-Income Securities: Defining Elements
7-2 Fixed-Income Markets: Issuance, Trading, and Funding
7-3 Introduction to the Valuation of Fixed-Income Securities
7-4 Understanding Yield Spreads
7-5 Fundamentals of Credit Analysis
8 Derivatives
8-1 Derivative Markets and Instruments
8-2 Pricing and Valuation of Forward Commitments
8-3 Valuation of Contingent Claims
9 Alternative Investments
9-1 Alternative Investments Overview
9-2 Risk Management Applications of Alternative Investments
9-3 Private Equity Investments
9-4 Real Estate Investments
9-5 Commodities
9-6 Infrastructure Investments
9-7 Hedge Funds
10 Portfolio Management and Wealth Planning
10-1 Portfolio Management: An Overview
10-2 Investment Policy Statement (IPS)
10-3 Asset Allocation
10-4 Basics of Portfolio Planning and Construction
10-5 Risk Management in the Portfolio Context
10-6 Monitoring and Rebalancing
10-7 Global Investment Performance Standards (GIPS)
10-8 Introduction to the Wealth Management Process
9.3 Private Equity Investments Explained

9.3 Private Equity Investments - 9.3 Private Equity Investments Explained

Key Concepts

Private Equity

Private Equity refers to investment funds that directly invest in private companies or engage in buyouts of public companies, resulting in the delisting of public equity. These investments are typically made by institutional investors and high-net-worth individuals.

Example: A private equity firm raises capital from pension funds, endowments, and wealthy individuals to invest in a portfolio of private companies.

Leveraged Buyouts (LBOs)

Leveraged Buyouts involve the acquisition of a company using a significant amount of borrowed money (leverage) to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans.

Example: A private equity firm acquires a manufacturing company using $200 million of its own capital and $800 million in borrowed funds. The acquired company's assets are pledged as collateral for the loans.

Venture Capital

Venture Capital is a form of private equity investment focused on funding early-stage, high-potential startups. Venture capitalists provide capital in exchange for equity and often play an active role in managing the company.

Example: A venture capital firm invests $5 million in a tech startup in exchange for a 20% equity stake. The firm also provides strategic guidance and connections to help the startup grow.

Growth Capital

Growth Capital is a type of private equity investment aimed at supporting the growth and expansion of established companies. These investments are typically made in companies that have a proven business model and are looking to scale operations.

Example: A private equity firm provides $10 million in growth capital to a mid-sized software company to fund the development of new products and expand its sales force.

Distressed Investments

Distressed Investments involve the acquisition of equity or debt in companies that are facing financial difficulties or are in bankruptcy. Investors in this space aim to turn around the company's fortunes and generate returns from its recovery.

Example: A private equity firm buys the debt of a struggling retail chain at a discount, restructures the company's operations, and eventually sells the improved business at a profit.

Exit Strategies

Exit Strategies are methods by which private equity investors realize their returns on investment. Common exit strategies include initial public offerings (IPOs), sales to strategic buyers, and secondary buyouts.

Example: After five years of ownership, a private equity firm takes its portfolio company public through an IPO, selling a portion of its equity stake and realizing significant returns.

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