Basically, PE refers to investing in companies who are not traded on public exchanges.
PE firms like New State raise money from long-term investors, including pensions, endowments and foundations. These institutions invest in private, closed-end funds. Unlike a public stock which can be sold on any day, their investments in PE firms like New State are long-term commitments.
Against the backdrop of having long-term capital, PE firms like New State can invest in companies which they think will grow over a multi-year horizon – say, five years or longer. When it’s time to sell, the PE firm must find a buyer for its stake, or for the whole company. Or it might bring the company public, after which it will trade on a public exchange.
During its ownership, the PE firm can support business decisions to optimize over a longer period. This runs in contrast to a public company, which might be more focused on quarterly results.
Because the ownership horizon and exit process are long-term, it is critical that the limited partner commitments are matched to be long-term.
All this said, there are many varieties of private equity investing across thousands of firms.