Part II: We Are All Private Market Investors (Sort Of)

Here’s a fun fact: you’re probably already an investor in private markets.

Even if you’ve never heard of a “General Partner,” if you have a pension fund or an insurance policy, your money is likely being funneled into private companies. Big institutions like banks and pension funds take the premiums we pay and invest them in non-listed companies to get better returns.

In the world of private equity, we use two main names for the players:

1. Limited Partners (LPs): These are the ones with the money—pension funds, insurance companies, and very wealthy individuals. They are called “limited” because they usually have a “hands-off” role. They give the money to the pros and wait for the returns.
2. General Partners (GPs): These are the professional fund managers. They are the ones doing the hard work: finding companies, negotiating deals, and helping those businesses grow.

The relationship between LPs and GPs is all about trust. An LP is basically saying, “I trust you to manage my millions for the next 10 years.”

Because these investments are private, we don’t have a stock ticker to check the price every day. That’s why LPs have to be very careful about who they pick. They look for managers with a great track record and a solid plan.

In the next post, we’re going to look at the “J-Curve”—the reason why private equity investments usually look like they’re losing money before they start making a lot of it.

Next post: The J-Curve - why things get worse before they get better