Private Equity Investment Basics

The managing director for Oaktree Capital, Caleb Kramer serves as the European portfolio manager, focused on private equity transactions and distress-for-control investments. Caleb Kramer is also the cofounder of Seneca Capital Partners, LLC, a private equity investment firm.

Private equity, equity that is neither traded nor listed publicly, is comprised primarily of pension funds or large private equity firms due to the sizable amount of capital required. Leveraged buyouts and venture capital investments are the most common types of private equity investments. Venture capital investments usually involve newer industries and companies, as firms invest in low-performing companies with the intent of guiding, or sometimes directly managing, toward better position and value in the industry. Leveraged buyouts, by contrast, involve a much smaller investment by private equity firms, with the rest of the purchase price coming from debt collateralized by the firm. The company then becomes collateral for the firm.

Both types of private equity investments are long term, many for at least 10 years, as companies have their inefficiencies streamlined and management and operations improve, maximizing the potential return for private equity firms.

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