How to Invest in Private Equity

Many investors see private equity investments as a gateway to the most lucrative opportunities in the financial markets. The professionals who run private equity companies raise substantial amounts of capital from investors, sometimes use the money as collateral to borrow more capital, and then go out to buy companies that are particularly attractive. Private equity typically purchases entire companies rather than taking a partial equity interest, and companies whose stock is publicly traded prior to a private equity buyout are typically no longer available in the public markets after the buyout. Therefore, to invest in private equity, you have to ask the following questions:

The SEC wants only qualified investors to be able to invest in private equity. Private equity investments aren't subject to the same level of disclosure requirements as publicly traded companies, and so public policy dictates that only those investors who have the level of sophistication to be what the SEC calls accredited investors can participate.

In defining the SEC standard, "sophistication" basically means money. In particular, accredited investors must have:

Source: Fool.com