Being an aspiring commercial lawyer often means being confronted by complex, often abstract, concepts - which can result in students and trainees being faced with jargon that can be difficult to understand. We’ve therefore introduced LegalLingo to break down these concepts into bite-size explanations to make the industry more accessible for aspiring lawyers.
Up next in the series is an explanation of what private capital is:
Most people are comfortable with the term 'private equity'. Firms like Bain Capital, TPG and Advent in the US and 3i, Bridgepoint and Cinven in the UK have been investing money in businesses, developing them and selling them on for decades. But private equity and venture capital are just part of a wider private capital universe. It is an area of finance that has been around forever, but has become increasingly commented on in the last couple of years.
The term 'private capital' refers to investments in unlisted assets, often (but not always) by private pools of money such as buyout firms, sovereign wealth funds, private investment funds and wealthy investors. Institutions with a long-term view, such as pension funds and university endowment funds are also active in the market (either via direct investments or through investments in funds), as are banks.
The distinction between private capital and private equity is that the former is the umbrella term for all types of investments in unlisted assets. This includes private equity (investments in private companies and/or buyouts of public companies), but also encompasses venture capital (investments in early stage companies with high growth potential), real estate (investments in real estate assets), private debt (debt investments that are not publicly traded), infrastructure (investments in infrastructure assets) etc.
Want to find out more about private capital? If so, here are links to three excellent articles on the subject:
- Financial Times
- The Economist: Everyone now believes that private markets are better than public ones
- The Economist: The rise and rise of private capital
If you found this helpful, why not check out the other LegalLingo posts on our website? We’ll be adding to it regularly so keep an eye out for them.