Cheap debt and relatively minimal regulation have fueled private equity's expansion in recent years.

The first private equity fund was launched in 1960

At the time, the industry—and the public's understanding of it—was rather limited, and few private equity firms existed until the 1980s. The first leveraged buyout is thought to have taken place in 1955.

Private equity firms often use leveraged buyouts to acquire new companies

In a leveraged buyout or "LBO," private equity funds finance acquisitions with debt secured by the target company's assets and cash flows. The PE firm aims to improve operations and leverage the company's profile to pay down debt, thereby increasing equity value.

Private equity's expansion into healthcare has been criticized for raising patient medical costs

Between 2000 and 2018, PE's total investment in healthcare ballooned from $5B to $100B. While healthcare systems originally began consolidating as a solution to navigating complex regulations (and to make working with insurance companies easier), research suggests that private equity has both increased patient costs and decreased the quality of care in hospitals and doctors' offices.

Private equity companies are selling off more acquisitions—but at much lower prices

In 2025, private equity exits were up by 5.4%, but the total value of those deals was down by 21.2% year-over-year. An exit occurs when a private equity firm either sells an acquired company or takes that company public.

Some institutional investors are growing wary of private equity, as certain investments underperform traditional market indices

Private equity often attracts investors who can afford to tie up capital for long periods of time in exchange for higher returns than traditional investments. For many years, private equity at least tracked with the S&P 500 in terms of returns to investors, but in 2024 and 2025, it underperformed and posted declining returns.

Private equity firms can be 'powerful partners' or 'formidable competitors'

Under the best circumstances, PE firms can increase a company's value using strategies that might not be suitable for public companies facing pressure for immediate shareholder returns. But PE firms are often portrayed negatively due to the aggressive strategies they sometimes use to cut inefficiencies. As PE has grown, many firms have changed their strategies, shifting away from aggressive scaling to more integrated acquisitions.

Private equity deals sometimes come with layoffs.

Private credit and private equity are both alternative assets

Like private equity fund managers, private credit managers typically raise funds directly from investors, lending to corporations. The borrowers can benefit from the lack of middlemen and resulting efficiency, and the lenders often yield comparatively higher returns.

Nearly half of billionaires planned to increase exposure to direct private equity investments in 2026.

The private credit industry—which offers nonbank loans directly to businesses, particularly privately held midmarket companies—grew from a $250B asset class in 2010 to around $1.5T in early 2024.

Private equity is viewed as an alternative investment

These different types of private equity include venture capital, growth equity, and buyouts.

The majority of capital in private equity funds is provided by institutional investors

The individuals who invest this initial capital are called the firm's limited partners. Private equity firm LPs include sovereign wealth funds, university endowments, high-net-worth individuals, and more.

Investing in private equity is typically reserved for 'accredited investors'

Limiting PE to accredited investors helps protect less experienced investors from large and risky investments. Accredited investors must meet requirements set by the Securities and Exchange Commission—they're typically required to have a net worth exceeding $1M, for instance. (Some users may experience a paywall.)

Why private credit is attractive to both businesses and investors

While investors are attracted to the high rates, private credit is particularly attractive to mid-sized businesses that are too small for bank syndication and want faster, more flexible financing options.

The private credit industry offers nonbank loans directly to businesses, particularly privately held midmarket companies.

Explore the differences between private equity, venture capital, and hedge funds

Private equity firms focus on buying and improving private companies with the intent to sell them for profit or take them public. Venture capital is technically a form of private equity in which investors focus on startups and generally don't seek majority control of the company. Hedge funds are pooled investments for sophisticated investors that pursue a wide range of often complex strategies.

Why private credit has faced challenges in recent years

The factors that some experts say are driving what could be private credit's most challenging era since the 2008 financial crisis include global economic uncertainty around trade and tariffs, investor fears about the amount of money being spent on artificial intelligence, and more.

Between 2016 and 2023, PE spent more than $200B buying British companies

Between the COVID-19 pandemic and the United Kingdom's official departure from the European Union, the UK's economy struggled to recover. This economic strife led to British companies receiving steadily lower valuations than American companies, prompting a huge increase in PE investment. However, interest rates began increasing in 2022, putting pressure on the numerous leveraged buyout deals that took place between 2020 and 2021.

In 2024, US private equity posted an 8.1% return

Tracked by Cambridge Associates, 2024 performance saw limited partner distributions overtake contributions for the first time in years. Cambridge Associates, a leader in the space, typically uses a 2.0x+ MOIC (Multiple on Invested Capital) as a benchmark for top-quartile PE fund success.

Borrowers were increasingly defaulting on private credit loans as of early 2026

Risks in private credit investing include the industry's lack of transparency and the ability of businesses to borrow more than a bank might allow against their debt. Some borrowers in early 2026, for instance, likely did not expect interest rates to be so high for so long, which could be contributing to an uptick in defaults.

Pension funds' allocations to risky, alternative investments increased by 25% between 2001 and 2021

The portion of pension funds' risky investments, including alternative investments such as private equity, increased from 14% in 2001 to 39% in 2021. Analysts say private equity investments have delivered higher returns than traditional assets like stocks and bonds. Increased investment in private equity has also given pensions a way to recover from the 2008 financial crisis without necessarily investing more money.

Private credit is a nonbank loan made directly to a business

Similar to private equity, private credit is part of the private markets world. Both strategies offer illiquid, privately negotiated investments for privately held companies. Unlike private equity investors, however, private credit investors typically do not take ownership stakes in the companies they invest in.

Some semi-liquid private credit funds saw a surge in investor redemptions in early 2026

This raised red flags about the state of the private credit market at large. However, experts have cautioned that the idea that private credit is on the verge of collapse is overstated.

Retail investors cannot directly invest in private credit funds—but other financial vehicles can offer exposure to the industry

For example, as some US regulations have loosened in recent years, retail investors have begun to get exposure to the private credit market via ETFs that invest in publicly traded financial vehicles with private credit exposure, such as BDCs.

Should companies be owned by their workers?

In the last half-century, so-called private equity has transformed industries by purchasing private companies, cutting costs, loading up debt, and then selling the business at a premium—all at a huge profit to the investors. Workers, on the other hand, are often left with nothing. Listen to how both pro-worker economists and a private equity stalwart are trying to shift ownership to workers—a growing tactic proven to improve worker satisfaction and company value.

Family offices have been increasing their allocations to private credit

Private firms that manage family fortunes have been investing more in alternatives like venture capital and real estate, impacting the wider financial world.

Visualize the world's top 50 private equity firms in 2025 by capital raised.

PetSmart and Hilton are among 10 of the most famous leveraged buyouts in history

Some of the most famous leveraged buyout deals include Blackstone's 2007 acquisition of Hilton Hotels, in which Blackstone took the then-public company private and then returned it to the public markets in 2013. A British PE firm bought PetSmart for $9B in 2014—one of the most expensive leveraged buyouts since 2007.

Direct lending is the most common form of private credit

Other types include opportunistic credit, special-situations credit, mezzanine finance, venture debt, infrastructure debt, real estate debt, and more. All of these sources of capital technically create private transactions, so they can all call themselves private credit.

Roughly 10% of US apartments were owned by private equity firms as of 2025.

A private equity firm led the leveraged buyout of Toys 'R' Us before the company's bankruptcy

After being acquired by two private equity firms and a real estate company for more than $6B in 2005, Toys 'R' Us filed for bankruptcy in 2017. Many point to the $400M a year the company had to pay to service its debt, as well as increased competition from online retailers like Amazon, for draining its profits and ultimately dragging it under.

See a database of large companies owned by private equity firms

The Private Equity Stakeholder Project tracked more than 200 companies owned by private equity with more than 7,000 employees. Companies on the list include J. Crew, Jersey Mike's Subs, Barnes and Noble, Panera Bread, and Tropical Smoothie Cafe.

Private equity IRR is the internal rate of return on a PE investment or fund

It's typically expressed as an annualized percentage that incorporates both the size and timing of cash flows between investors and the fund. It's the discount rate that makes the net present value of all cash flows equal zero. Many private equity funds target a net IRR in the mid‑teens to low‑20s percent range, with an 8% "hurdle" or preferred return as a minimum before carried interest or "carry" is paid.

Special-purpose acquisition companies let companies skirt the IPO process

A video explains how private companies have taken advantage of this loophole, why investing in these companies isn’t always a good idea, and how blank-check companies (as they’re commonly called) work.

The funeral home industry is increasingly consolidating via private equity firms

A growing share of the funeral home industry is being acquired by private equity-backed firms. A 2022 article states that about 20% of this $23B business is owned by funeral home chains, and private equity-backed firms own about a quarter of those.

Many politicians join private equity firms after leaving Washington

Both Democrats and Republicans have a history of leaving politics to work in private equity, raising concerns about the government's protection of private equity firms.

The 'Two and Twenty' structure allows hedge funds and private equity firms to earn significant returns

With this structure, firms charge limited partners or "LPs" a 2% management fee for overseeing the fund (assets under management or AUM) and take 20% of the fund's overall profits (carried interest). Many private credit funds also operate under this structure.

Apollo Global Management and Blackstone are among the world's top 20 private credit fund managers

While Blackstone is the world's largest alternative asset manager, Apollo Global Management is a large private equity firm. Apollo had $480B in private credit assets under management as of January 2025.

The venture capital mindset is shaping the US into a 'portfolio state'

For decades, the US has operated as a low-regulation, private-sector-driven, globalized economy (also known as neoliberalism). In recent years, the Trump administration has taken direct stakes (rather than providing subsidies) in private companies with strategic products like semiconductors and rare earths. This paper argues the approach allows the US to capture the upside of growth.

Some private credit funds trade on the stock market

These funds, which trade at market prices, are called "public BDCs," which stands for "business development companies." For instance, the global alternative investment manager Ares Management Corp. has a public BDC.

In the aftermath of the 2008 financial crisis, the Fed began a program of quantitative easing

This program injected trillions of dollars of new money into financial markets to stimulate the economy. The move catalyzed an 11-year bull run and was repeated during the pandemic. Experts argue such power could worsen wealth inequality and contribute to bubbles in housing and finance.

More than half of today's family offices—the private companies that help ultrawealthy individuals manage their fortunes—were incorporated after 2010.

'Floating rate' loans periodically adjust their interest rates in accordance with economic conditions

When the Federal Reserve began raising interest rates in 2022 to combat inflation, interest payments borrowers owed to private credit lenders increased accordingly. Private credit funds benefited as loan returns increased, making the asset class attractive to investors at the time.

Find out ways to get lower rates on private loans, such as applying with a cosigner.

Subprime lending practices, which fueled the housing bubble, surged after 2000.

Banks have increased small loan programs since 2018, upping competition for payday lenders

One of the reasons payday lending flourished for nearly two decades is that most banks charged high overdraft fees and didn't offer small loans. However, since 2018, banks have increased their small loan options. Supporters say this provides safer alternatives for consumers, as banks are subject to more regulatory measures and are less likely to allow consumers to keep rolling over loans.

Before the Great Recession, lax requirements to get a mortgage resulted in mass defaults that left nearly 19 million homes vacant.

Companies go public via an initial public offering (IPO) to raise large amounts of capital, helping them expand, invest in new ventures, hire more staff, or pay off debts.

Explore an alternative investments timeline

From what’s known as the first leveraged buyout, when JPMorgan acquired the Carnegie Steel Company, to the creation of the first-ever hedge fund, alternative investments have a long history.

Private companies are often harder to value than public companies

That's partly because there isn't readily available stock information, and financial accounting is kept behind closed doors. Typically, determining the value of a private company involves, among other things, closely comparing the private company with its competitors.