Typology of Public-Private Equity

Private equity, which pools funds for investment in private businesses, is one of the largest and fastest growing investment opportunities in the markets today. Private equity traditionally sought investments exclusively from sophisticated investors such as high net worth individuals and institutional investors. More recently, however, a growing number of private equity businesses have gone public and opened their doors to public investors, who are drawn to these investments because of the possibility of high returns and the opportunity to diversify their investment portfolios. In this Article, I review the universe of public-private equity (or PPE) businesses that are traded on the United States stock exchanges to map out how PPE has engaged with public investors.

I find that PPE takes a variety of organizational forms, across different jurisdictions, and seeks investments from public investors at multiple levels within the private equity structure. While this variety expands the menu of options available to public investors, ignoring the fact that there are distinct types within the PPE universe can also be the source of investor and regulatory confusion. In this Article, I organize the PPE universe into three types according to whether the public investor is investing in the private equity adviser, fund, or both. This typology catalogs a complex and heterogeneous universe of firms that are sometimes lumped together as one to provide a deeper understanding of the unique structural and governance features of each type of PPE.

And, by taking a segmented view of the company, fund, and securities regulatory regimes which apply, this Article takes the first step towards constructing a clear framework through which to understand and regulate PPE.