January 14, 2012

Private Equity Funds explained

Private equity explained from Marketplace on Vimeo.

The basics of a private equity fund is to buy a company, borrow some money, reorganize the company, and sell it for a profit. This could sometimes be a good thing, and sometimes a bad thing. The company being re-organized for a short-term profit may end up with a long-term loss. Maybe this is one of the reasons the private equity funds have nicknames such as "corporate raiders" or "asset strippers."

If you want to learn more about these funds, watch the movie Wall Street with Gordon Gekko as an evil corporate raider. For a preview of the movie, watch this scene where Gordon Gekko explains why greed is a good thing:

Source: Marketplace